nep-sea New Economics Papers
on South East Asia
Issue of 2012‒06‒13
twelve papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Engaging Small and Medium Enterprises in Production Networks: Firm-level Analysis of Five ASEAN Economies By Wignaraja, Ganeshan
  2. General purpose central-provincial-local transfers (DAU) in Indonesia : from gap filling to ensuring fair access to essential public services for all By Shah, Anwar; Qibthiyyah, Riatu; Dita, Astrid
  3. Internationalisation of ICT R&D in Asia vis a vis the world regions By Nepelski, Daniel; De Prato, Giuditta
  4. The symbolic universe of Cyberjaya, Malaysia By Evers, Hans-Dieter; Nordin, Ramli
  5. Crop returns, prices, credit and poverty in Lao-PDR By Samuel Annim; Raghav Gaiha
  6. Do migrant girls always perform better? Differences between the reading and math scores of 15-year-old daughters and sons of migrants in PISA 2009 and variations by region of origin and country of destination By Kornder Nils; Dronkers Jaap
  7. Monetary Policy Reform in a World of Central Banks By Gunther Schnabl
  8. Organizing the Global Value Chain By Pol Antras; Davin Chor
  9. Les produits de terroir vietnamiens : points de vue des consommateurs locaux By Tran, T.T.; Figuié, M.; Sirieix, L.; Moustier, P.
  10. Long-Run Costs of Piecemeal Reform: Wage Inequality and Returns to Education in Vietnam By Phan, Diep; Coxhead, Ian
  11. Predatory Lending and the Subprime Crisis By Agarwal, Sumit; Ben-David, Itzhak; Amromin, Gene; Chomsisengphet, Souphala; Evanoff, Douglas D.
  12. Isolated Capital Cities, Accountability and Corruption: Evidence from US States By Campante, Filipe R.; Do, Quoc-Anh

  1. By: Wignaraja, Ganeshan (Asian Development Bank Institute)
    Abstract: The Association of Southeast Asian Nations (ASEAN) small and medium enterprises (SMEs) are under scrutiny for their engagement in production networks following recent emphasis on increasing intra-regional trade, rebalancing, and inclusive growth in Asia. Using a data set covering 5,900 firms in five ASEAN economies at different stages of development, this paper analyses the participation of SMEs in production networks, determinants, and policy implications. It finds that although large firms dominate production network engagement in ASEAN economies, there are signs that SMEs have modestly increased their participation since the late-1990s. This is linked to firm-specific factors (e.g., firm size, foreign ownership, skills, technological capabilities, and access to credit) as well as a supportive business environment. Tackling residual supply-side and policy constraints can further the participation of ASEAN SMEs in production networks.
    Keywords: small and medium enterprises; production networks; asean; intra-regional trade
    JEL: F10 F23 O14
    Date: 2012–06–01
  2. By: Shah, Anwar; Qibthiyyah, Riatu; Dita, Astrid
    Abstract: Indonesia has come a long way from centralized governance to decentralized local governance, and today Indonesia ranks among the most decentralized developing countries. The Government of Indonesia is revisiting all aspects of local governance to make appropriate legal and institutional adjustments based on lessons leaarned during the past decade. An important area of this re-examination and possible reform is the central financing of subnational expenditures. The system of intergovernmental finance represents one of the most complex systems ever implemented by any government in the world. The system is primarily focused on a gap-filling approach to provincial-local finance in an objective manner to ensure revenue adequacy and local autonomy but without accountability to local residents for service delivery performance. This paper takes a closer look at Dana Alokasi Umum -- the most dominant program of unconditional central transfers to finance provincial-local government expenditures in Indonesia. The paper also presents illustrative simulations of alternative programs and compares these with the existing Dana Alokasi Umum allocations. The paper concludes that super complexity leads to lack of transparency, inequity, and uncertainty in allocation. Simpler alternatives are available that have the potential to address autonomy and equity objectives while also enhancing efficiency and citizen-based accountability. Such alternatives would represent a move away from the complex gap-filling approach to simple output-based transfers to finance operating expenditures. Capital grants would deal with infrastructure deficiencies. And the alternatives would institute fiscal capacity equalization as a residual program with an explicit standard to ensure that all local jurisdictions have adequate means to deliver reasonably comparable levels of public services at reasonably comparable levels of tax burdens across the country.
    Keywords: Subnational Economic Development,Public Sector Economics,Banks&Banking Reform,National Governance,Debt Markets
    Date: 2012–06–01
  3. By: Nepelski, Daniel; De Prato, Giuditta
    Abstract: We analyse the internationalisation of ICT R&D in Asia and compare it with the other world regions. Despite the strong linkages between Japan, the US and the EU, Asia seems to be very attractive as a location for R&D activities. It is also striking how the role of Japan as a partner of other Asian countries decreased mainly in favour of the US. At the aggregate level, there are strong differences in R&D internationalisation across regions. This might indicate that each region follows a different R&D internationalisation path. Alternatively, it might also be a sign of unequal capabilities of "going global". In this respect, the US offers an interesting example of a region which benefit from the process of internationalisation of inventive activity not only through building research collaborations with foreign inventors, but also through successfully capturing innovations developed by foreign researchers.
    Keywords: Globalisation; R&D internationalization; R&D location; patent statistics
    JEL: O32 D80
    Date: 2011–12–01
  4. By: Evers, Hans-Dieter; Nordin, Ramli
    Abstract: This paper analyses how various actors have used potent urban symbols to assert their vision of a modern, globalized Malay identity in the construction of the recently founded knowledge city of Cyberjaya, part of the flagship Multimedia Super Corridor project. As the state controls both the land and the urban planning process it has attempted to impose its own particularistic vision of Malaysian society on urban space and urban structures. This is demonstrated through an analysis of the discursive vision behind Cyberjaya, the logos of government corporations, the use of architectural forms and motifs, and the treatment of urban space itself. The discussion suggests the spatial and symbolic universe of Cyberjaya draws on both patterns of ‘traditional’ Malay life as well a projected vision of a modernized Malay identity that resonates with a globalized Islam. This generates contestations in which other possible imaginings of Cyberjaya’s symbolic space become possible.
    Keywords: urban development; urban symbols; urban economy; identity; knowledge; development; Malaysia
    JEL: O18 Z1 N9 D8 R5
    Date: 2012–05–10
  5. By: Samuel Annim; Raghav Gaiha
    Abstract: Abstract With Lao PDR’s macroeconomic performance currently booming, we investigate the country’s poverty situation by examining the drivers of household poverty. This paper tests four major hypotheses: (1) Whether higher returns on all crops harvested per capita reduce consumption expenditure, food expenditure and the World Bank’s US$1.25/day (PPP, 2005) poverty cut-offs? (2) Whether higher returns on glutinous rice harvested per capita also reduce poverty? (3) Whether higher crop prices lower poverty? (4) Whether easier access to credit contributes to poverty reduction? Data on 5,031 households from the fourth round of the Laos Expenditure and Consumption Survey (LECS IV) are used to estimate Probit and instrumental variable Probit equations. Potential endogeneity of some of these variables (e.g. returns to crops harvested) is addressed through appropriate instrument variables. Briefly, returns on crops harvested reduce different measures of poverty (e.g. food poverty, dollar poverty), as do higher producer prices and easier access to credit. An important policy conclusion in light of Millennium Development Goal 1 is the imperative of higher returns on rice and glutinous rice, more remunerative prices for farmers and easier access to credit. These areas of policy concern assume greater importance as Laos prepares for its accession to the World Trade Organization (WTO). An accelerated market-orientation of agriculture may induce not just greater efficiency but also more equitable outcomes.
    Date: 2012
  6. By: Kornder Nils; Dronkers Jaap (ROA rm)
    Abstract: As a follow-up of earlier analyses of the educational performance of all pupils with amigration background with Programme for International Student Assessment (PISA)waves 2003 and 2006, we analyze the differences between the educational performanceof 15-year old daughters and sons of migrants from specific regions of origin countriesliving in different destination countries. We use the newest PISA 2009 wave. Instead ofanalyzing only Western countries as destination countries, we analyze the educationalperformance of 16,612 daughters and 16,804 sons of migrants in destinationcountries across Asia, Europe, Latin America, and Oceania. We distinguish 62 origincountries and 12 origin areas in 30 destination countries. We test three hypotheses:1) The daughters of migrants from poorer, more traditional regions perform much betterin reading than comparable sons of migrants from the same origin regions, while thedaughters of migrants from more affluent and liberal regions perform slightly betterin reading than comparable sons of migrants from the same regions. 2) Individualsocioeconomic background has a stronger effect on the educational performance ofdaughters of migrants than on the performance of sons of migrants. 3) The performanceof female native pupils has a higher influence on the performance of migrant daughtersthan the performance of male native pupils has on the performance of migrant sons.The first hypothesis can only partly be accepted. Female migrant pupils have bothhigher reading and math scores than comparable male migrant pupils, and these genderdifferences among migrant pupils are larger than among comparable native pupils. Theadditional variation in educational performance by region of origin is, however, notclearly related to the poverty or traditionalism of regions. Neither the second nor thethird hypothesis can be accepted, given our results.
    Keywords: labour market entry and occupational careers;
    Date: 2012
  7. By: Gunther Schnabl (Institute for Economic Policy, University of Leipzig)
    Abstract: The paper identifies based on the monetary overinvestment theories by Wicksell (1898), Mises (1912) and Hayek (1929) monetary policy mistakes in large industrial countries issuing international currencies. It its argued that a neglect towards monetary policy reform in a world dominated by financial markets has led to the erosion of the allocation and signaling function of the interest rate, which has triggered an excessive rise of the government debt and structural distortions in the world economy. The backlash of high government debt levels on monetary policy making is argued to have led to a hysteresis of the liquidity trap. In this context, monetary reform is discussed with respect to the exit from low interest rate and high debt policies, an adaption of monetary policy rules to financial market dominated economic development, and the displacement of the prevalent world monetary system. Enhanced competition between dollar and euro as international currencies moderated by East Asia is proposed to constitute a more stable international monetary system.
    Keywords: Economic Instability, Credit Cycles, Monetary Policy, Hayek, Mises, Monetary Policy Rules, Monetary Policy Reform, Currency Competition
    JEL: E42 E58 F33 F44
    Date: 2012–05–28
  8. By: Pol Antras; Davin Chor (School of Economics, Singapore Management University)
    Abstract: We develop a property-rights model of the firm in which production entails a continuum of uniquely sequenced stages. In each stage, a final-good producer contracts with a distinct supplier for the procurement of a customized stage-specific component. Our model yields a sharp characterization for the optimal allocation of ownership rights along the value chain. We show that the incentive to integrate suppliers varies systematically with the relative position (upstream versus downstream) at which the supplier enters the production line. Furthermore, the nature of the relationship between integration and “downstreamness” depends crucially on the elasticity of demand faced by the final-good producer. Our model readily accommodates various sources of asymmetry across final-good producers and across suppliers within a production line, and we show how it can be taken to the data with international trade statistics. Combining data from the U.S. Census Bureau’s Related Party Trade database and estimates of U.S. import demand elasticities from Broda and Weinstein (2006), we find empirical evidence broadly supportive of our key predictions. In the process, we develop two novel measures of the average position of an industry in the value chain, which we construct using U.S. Input-Output Tables.
    Date: 2012–05
  9. By: Tran, T.T.; Figuié, M.; Sirieix, L.; Moustier, P.
    Abstract: The concept of origin-linked product is familiar to Vietnamese urban consumers: in a survey conducted in 2005,Vietnamese urban consumers were able to quote 265 Vietnamese origin- linked products, mainly fresh ones (fruits and vegetables). These products are valued for their sanitary quality and their cultural and historical meaning. Current debates on geographical indication suggest using the reputation of the origin-linked products among local consumers as an evidence of a specific link between products and geographical origins. Nevertheless this approach raises some problems, quality being a social construction. Increasing the role of consumers in defining this quality might weaken the role of producers and the possibility to use the geographical indication as a development tool. ...French Abstract : Le concept de produits de terroir est un concept familier aux consommateurs urbains vietnamiens : ils ont pu citer au cours de notre enquête réalisée en 2005 plus de 265 produits, principalement des produis frais (fruits et légumes). Ces produits sont appréciés pour leur goût, leur qualité sanitaire et leur dimension culturelle. Mobiliser la réputation des produits terroirs auprès des consommateurs locaux en tant que preuve de l'existence d'un lien spécifique produit-terroir, comme le suggèrent certaines réglementations, pose un certain nombre de problèmes. En particulier, si l'on reconnaît que la qualité est une construction sociale, le poids accru donné aux consommateurs dans cette construction risque d'affaiblir les producteurs et le rôle du dispositif IG comme outil de développement.
    JEL: D12 Q13 L15 O53
    Date: 2012
  10. By: Phan, Diep (Beloit College); Coxhead, Ian (University of WI)
    Abstract: "Shock therapy" transitions in Eastern Europe facilitated movement of skilled workers into privatized industries offering high wage premia relative to state industries. Other transitional economies (notably China and Vietnam) have been slower to relinquish control over key industries and factor markets. Some costs of this piecemeal approach are now becoming apparent. We examine the spillover of continuing capital market distortions into the market for a complementary factor, skilled labor. Using Vietnamese data we find that capital market segmentation creates a two-track market for skills, in which state sector workers earn high salaries while non-state workers face lower demand and lower compensation. Growth is reduced directly by diminished allocative efficiency and incentives to acquire education, and indirectly by higher wage inequality and rents for workers with access to state jobs.
    JEL: F16 J31 P23
    Date: 2012–05
  11. By: Agarwal, Sumit (National University of Singapore and Federal Reserve Bank of Chicago); Ben-David, Itzhak (OH State University); Amromin, Gene (Federal Reserve Bank of Chicago); Chomsisengphet, Souphala (US Office of the Comptroller of the Currency); Evanoff, Douglas D. (Federal Reserve Bank of Chicago)
    Abstract: It is typically argued that predatory lending generated significant social costs and played a central role in creating the subprime crisis. However, there are few estimates of its true effect. We estimate the effect of predatory lending on the residential mortgage default rate using an anti-predatory program implemented in Chicago in 2006. Under the legislation, risky borrowers and risky mortgages triggered mandatory counseling. Following the legislation, market activity decreased by about 35%, where risky borrowers, risky products, and lenders who typically made riskier loans were most affected. Despite the sharp decline in market activity, 18- and 36-month default rates in the treated group exhibited a relative improvement of 12% and 7%, respectively. We estimate that predatory loans have a 6-7% higher default rate than nonpredatory loans. Our results suggest that predatory lending may have not been instrumental in precipitating the financial crisis as often believed.
    Date: 2012–05
  12. By: Campante, Filipe R. (Harvard University); Do, Quoc-Anh (Singapore Management University)
    Abstract: We show that isolated capital cities are robustly associated with greater levels of corruption across US states. In particular, this is the case when we use the variation induced by the exogenous location of a state's centroid to instrument for the concentration of population around the capital city. We then show that different mechanisms for holding state politicians accountable are also affected by the spatial distribution of population: newspapers provide greater coverage of state politics when their audiences are more concentrated around the capital, and voter turnout in state elections is greater in places that are closer to the capital. Consistent with lower accountability, there is also evidence that there is more money in state-level political campaigns in those states with isolated capitals. We find that the role of media accountability helps explain the connection between isolated capitals and corruption. In addition, we provide some evidence that this pattern is also associated with lower levels of public good spending and outcomes.
    JEL: D72 D73 L82 R12 R50
    Date: 2012–05

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