nep-sea New Economics Papers
on South East Asia
Issue of 2012‒11‒11
eighteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Shocks, individual risk attitude, and vulnerability to poverty among rural households in Thailand and Vietnam By Gloede, Oliver; Menkhoff, Lukas; Waibel, Hermann
  2. Civil Service Reform in Indonesia: Culture and Institution Issues By Prijono Tjiptoherijanto
  3. Regionalism in East Asia: The Way Forward By Fithra Faisal Hastiadi
  4. Reducing Fuel Subsidies and the Implication on Fiscal Balance and Poverty in Indonesia: A Simulation Analysis By Teguh Dartanto
  5. Impact of Changes in the Global Financial Regulatory Landscape on Asian Emerging Markets By Watanagase, Tarisa
  6. Geographical simulation analysis for logistics enhancement in Asia By Kumagai, Satoru; Hayakawa, Kazunobu; Isono, Ikumo; Keola, Souknilanh; Tsubota, Kenmei
  7. Economic growth and institutions in developing countries: Panel evidence By Ahmad, Mahyudin; Marwan, Nur Fakhzan
  8. The Battle for Rubber in Benin By James Fenske
  9. The Key Success Factors of Penang as the Silicon Valley of the East By Wahyuni, Sari; Anoviar, Alia Noor; Santoso, Anom Jati
  10. The surprising effects of the great recession : losers and winners in Thailand in 2008-2009 By Haughton, Jonathan; Khandker, Shahidur R.
  11. Trade and Divergence in Education Systems By Pao-Li Chang; Fali Huang
  12. Agriculture, Markets and Poverty – A Comparative Analysis of Laos and Cambodia By Raghav Gaiha; Md Shafiul Azam; Samuel Annim; Katsushi S. Imai
  14. Good Governance: The Storybook Children By Prijono Tjiptoherijanto
  15. Agriculture, Markets and Poverty - A Comparative Analysis of Laos and Cambodia By Raghav Gaiha; Md Shafiul Azam; Samuel Annim; Katsushi S. Imai
  16. The People’s Republic of China and Global Imbalances from a View of Sectorial Reforms By Ito, Hiro; Volz, Ulrich
  17. Egalitarian Envy: Cross-cultural Variation in the Development of Envy in Children By Kirsten Häger; Bastiaan Oud; Daniel Schunk
  18. Gambling on Genes: Ambiguity Aversion Explains Investment in Sisters’ Children By Brishti Guha

  1. By: Gloede, Oliver; Menkhoff, Lukas; Waibel, Hermann
    Abstract: We examine whether the experience of shocks influences individual risk attitude. We measure risk attitude via a simple survey item, compiled among more than 4,000 households in Thailand and Vietnam. The experience of adverse shocks, which is typical for poor and vulnerable households, is related to a higher degree of risk aversion, even when controlled for a large set of socio-demographic variables. Therefore, shocks perpetuate vulnerability to poverty via their effect on risk attitude. We extend this general finding to various categories of shocks and find differences between Thailand and Vietnam. This suggests that risk-coping strategies profit from case-specific design.
    Keywords: Risk attitude, shocks, vulnerability, risk perception, behavior towards risk, Southeast Asia
    JEL: O12 D81 R2
    Date: 2012–10
  2. By: Prijono Tjiptoherijanto (Department of Economics Faculty of Economics, University of Indonesia)
    Abstract: In adapting to the globalization era, the Indonesian government has to improve the structure of its bureaucracy, both in terms of enhancing the quality of government employee, and developing a modern and efficient government system. As with any reform, strong and determined leadership is crucial. While good governance is central for anticipatring the challenges of global competition, Indonesia must also undertake civil service reforms to achieve a cleaner and more efficient bureaucracy.
    Keywords: decentralization, culture dimension, institutional reform
    JEL: H11
    Date: 2012–07
  3. By: Fithra Faisal Hastiadi (Department of Economics, Faculty of Economics, Universitas Indonesia)
    Abstract: For the past few years, regionalism has been progressing in East Asia with the likes of China, Japan, and Korea (CJK) as the most prominent actors. Unfortunately, with the absence of trade arrangement amongst the CJK, the present regional trade scheme is not sufficient to reach sustainability. This paper uncovers the inefficient scheme through Engle-Granger Cointegration and Error Correction Mechanism. This paper also proves that China’s action to conduct FTA with ASEAN countries will create Baldwin’s domino effect to Japan and Korea. Moreover, the paper underlines the importance of triangular trade agreement for accelerating the phase of growth in CJK which eventually create a spillover effect to East Asia as a whole. Employing Two Stage Least Squares in a static panel fixed effect model, the paper argues that the spillover effect will function as an impetus for creating region-wide FTA. Furthermore, the paper also identifies a number of economic and political factors that can support the formation of East Asian Regionalism.
    Keywords: regionalism, engle-granger cointegration, error correction mechanism, fixed effect, two stage least squares
    JEL: F15 C13 C22 C33
    Date: 2012–07
  4. By: Teguh Dartanto (Institute for Economic and Social Research, Department of Economics, Faculty of Economics, Universitas Indonesia)
    Abstract: An increase in world oil prices has forced the government of Indonesia to run a larger budget deficit to finance energy subsidies. Between 2000 and 2011, Indonesia burnt 61 per cent of oil and gas revenues to fuel and electricity subsidies. These subsidies worsen income distribution in Indonesia since almost 72 per cent of these subsidies are enjoyed by the 30 per cent of the richest income groups. Therefore, there are strong economic arguments to reallocate fuel subsidies to infrastructures, education and health sectors that can boast economic growth. Applying a CGE-Microsimulation, this study found that removing 25 per cent of fuel subsidies increases the incidence of poverty by 0.253 per cent. If this money were fully allocated to government spending, the poverty incidence would decrease by 0.270 per cent. Moreover, the 100 per cent removal of fuel subsidies and the reallocation of 50 per cent of them to government spending, transfers and other subsidies could decrease the incidence of poverty by 0.277 per cent. However, these reallocation policies might not be effective to compensate the adverse impacts of the 100 per cent removal of fuel subsidies if economic agents try to seek gain through mark-up pricing over the increase of production costs.
    Keywords: fuel subsidies, fiscal balance, poverty, Indonesia, energy policy
    JEL: C68 I32 Q42 Q48
    Date: 2012–05
  5. By: Watanagase, Tarisa (Asian Development Bank Institute)
    Abstract: This paper discusses the relevance of Basel III to Asian emerging markets. It reviews some of the proposed regulations of Basel III in order to evaluate their likely implications for, and their ability to enhance, the stability of the banking and financial system. This is followed by a discussion on the challenges faced by the regulators of Asian emerging markets in effectively managing their financial regulations, given their capacity and institutional constraints. The paper concludes with policy recommendations for Asian emerging markets to strengthen and enhance the stability of their banking and financial systems.
    Keywords: basel iii; asian emerging markets; banking system; financial system; financial regulations
    JEL: E52 G21 G28
    Date: 2012–10–26
  6. By: Kumagai, Satoru; Hayakawa, Kazunobu; Isono, Ikumo; Keola, Souknilanh; Tsubota, Kenmei
    Abstract: This paper presents a simulation of the reduction of several components in trade cost for Asia and examines its impact on the economy. Our simulation model based on the new economic geography embraces seven sectors, including manufacturing and non-manufacturing sectors, and 1,715 regions in 18 countries/economies in Asia, in addition to the two economies of the US and the European Union. The geographical course of transactions among regions is modeled as determined based on firms’ modal choice. The model also includes estimates of some border cost measures such as tariff rates, non-tariff barriers, other border clearance costs, transshipment costs and so on. Our simulation analysis for Asia includes several scenarios involving the improvement/development of routes and the reduction of the above-mentioned border cost. We have shown that the contribution of physical and non-physical infrastructure improvements conducted together is larger than the sum of the contribution by each when conducted independently.
    Keywords: Asia, Transportation, Distribution, Costs, International trade, Geographical simulation, New economic geography, Trade cost
    JEL: F15 O53 R15
    Date: 2012–10
  7. By: Ahmad, Mahyudin; Marwan, Nur Fakhzan
    Abstract: Numerous empirical studies have documented the evidence of institutional significance towards economic growth. This study extends such evidence as it examines the link between institutions and growth in developing countries including East Asian region. By using neoclassical growth framework augmented with institutional controls and latest estimation technique in panel data analysis, this study finds evidence of positive institutions growth-effects and uncovers the channel of their effects toward growth. This study also fills the gap in the East Asian growth literature, in which, to the best of our knowledge, only two studies namely Rodrik (1997) and Campos and Nugent (1999) that document the institutional importance toward economic growth for the region and apparently these studies are for the period before the 1997 Asian Financial Crisis.
    Keywords: Institutions; economic growth; Asian Financial Crisis; dynamic panel analysis; generalized methods of moments;
    JEL: O43 E13
    Date: 2012–10–08
  8. By: James Fenske (St.Anthony’s College, University of Oxford)
    Abstract: At the start of the Second World War, British policies restricted rubber planting in Nigeria's Benin region. After Japan occupied Southeast Asia, Britain encouraged maximum production of rubber in Benin. Late in the war, officials struggled with the planting boom that had occurred. The war was a period of both continuity and change. Producers gained experience and capital. Forestry policies restricting planting survived, and output quality continued to occupy officials after the war. The colonial state was hindered by a lack of knowledge and resources, and by its pursuit of conflicting objectives in giving incentives to both producers and traders.
    Date: 2012–10–05
  9. By: Wahyuni, Sari; Anoviar, Alia Noor; Santoso, Anom Jati
    Abstract: The aims of this study is to analyze the key success factors of SEZs in Malaysia especially Penang as a centre of investment which is recognised as the Silicon Valley of the East. By employing qualitative research, the result of this study shows that Penang sources of competitiveness laid on their strategic location (close to airport and harbour), well equipped infrastructure, transparency in custom, tax offices, good education to support industry, supply chain, IT as well as the availability of talented human resources who have division background that suitable for electronic industry. This research also reveal the important of cluster strategy, strong comitment and support from local and central government
    Keywords: special economic zone; regional competitiveness; cluster strategy; Malaysia
    JEL: E2 Q5
    Date: 2012–09
  10. By: Haughton, Jonathan; Khandker, Shahidur R.
    Abstract: In 2009, buffeted by the great recession, Thai gross domestic product fell by 2.3 percent. Using monthly data from the socio-economic surveys of 200–2010, this paper finds, after controlling for household variables, that real consumption per capita rose in 2009 relative to 2008 for most groups, including the poor, urban and rural households, men, women, and children. The losers were residents of Bangkok, especially those aged 20-29, and those working in sales and services. During the recession year of 2009, school enrollment rates did not fall, and durable goods purchases actually rose; households probably reduced their savings, and also benefitted from the lower food prices that prevailed in 2009. A simulation exercise based on the slowdown in growth of gross domestic product would have missed these effects, as would models based solely on readily-available data series. This points to the importance of country-specific policy analysis, rooted in timely local evidence, including household survey data.
    Keywords: Economic Theory&Research,Currencies and Exchange Rates,Regional Economic Development,Markets and Market Access,Debt Markets
    Date: 2012–11–01
  11. By: Pao-Li Chang (Singapore Management University, School of Economics); Fali Huang (Singapore Management University, School of Economics)
    Abstract: This paper presents a theory on the endogenous choice of a country's education policy and the two-way causal relationship between trade and education systems. The setting of a country's education system determines its talent distribution and comparative advantage in trade; the possibility of trade by raising the returns to the sector of comparative advantage in turn induces countries to further differentiate their education systems and reinforces the initial pattern of comparative advantage. Specifically, the Nash equilibrium choice of education systems by two countries interacting strategically are necessarily more divergent than their autarky choices, although the difference is still less than what is socially optimal for the world. We provide some preliminary empirical evidence on the relationship between education system and talent distribution.
    Keywords: Education System, Talent Distribution, Comparative Advantage, Trade Pattern
    JEL: F16 I20 J24
    Date: 2012–09
  12. By: Raghav Gaiha; Md Shafiul Azam; Samuel Annim; Katsushi S. Imai
    Date: 2012
    Abstract: Appreciated for its culinary qualities, rice has become very important in the diets of households in Cameroon. The rice market is generally found Thai, Vietnamese, Chinese. But where is the rice Cameroon? The central objective is to identify trade policy tools to implement in Cameroon to meet the ambitions that the region is fixed in its Common Agricultural Policy. Determine which trade policy tools related to TEC / CEMAC would be more appropriate to stimulate production and promote regional trade. The methodology combines qualitative and quantitative analysis. The reference period is 2005 with support from the spinneret method that extends from 2006-2016. The final choice in instrument protection is primarily political and should reflect the need for coherence between the protective measures and the objective of food sovereignty defined at the sectoral agricultural policy in the region. Now exposed to strong competition and often unfair, it is difficult for operators to Central Africa to make the investments necessary to develop the agricultural sector. At the end of our analysis, we suggest that to increase the supply of rice in Cameroon should develop a tariff rate of 50% compliance with the WTO clause. The model showed that the TSI has a very positive impact on rice, with an increase in revenue of 14% to the producer and the production of 6%.
    Keywords: Local rice; agricultural policy; farming system; farm; farm household model; trade policy; food sovereignty
    JEL: F13
    Date: 2012–05–18
  14. By: Prijono Tjiptoherijanto (Department of Economics Faculty of Economics, University of Indonesia)
    Abstract: Good governance is an important issue over the last two decades. The concept of 'good governance' has some of the following effective dimension, wich are among all, nemely : public accountability and transparencey, the role of law, anti-corruption measures, civil society participation in development, and overall respect to human right. Therefore, in the implementation, a good governance concept sholud involves the active cooperation of three elements, wich are : government, civil society, and bussiness sector.
    Keywords: decentralization, culture dimension, institutional reform
    JEL: H11
    Date: 2012–07
  15. By: Raghav Gaiha (Economics, Australian National University (Australia)); Md Shafiul Azam (Economics, School of Social Sciences, University of Manchester (UK)); Samuel Annim (Department of Economics, University of Central Lancashire (UK)); Katsushi S. Imai (Economics, School of Social Sciences, University of Manchester (UK) and RIEB, Kobe University (Japan))
    Abstract: Laos and Cambodia have been transitioning to a market-oriented policy regime. Both are agrarian economies with agriculture contributing about one-third of the GDP. We assess prospects of achieving MDG1 and centrality of agricultural growth in achieving this goal. As these are macro relationships, richer insights into determinants of poverty are obtained by detailed analyses of recent household surveys in Laos and Cambodia. Some of these insights relate to access to markets, returns to crops, education, land size, non-farm activities, ethnic affiliation, and rural infrastructure, with unavoidable variation due to differences in the coverage of the household surveys used. Another major theme studied for Cambodia is integration of farmers - especially smallholders - into markets. The focus is on barriers between large and smallholders-for example, transaction costs. An accelerated transition to a more market-oriented policy regime may promote not just a more efficient agriculture but also a more equitable outcome.
    Keywords: Aagriculture, Poverty, MDG1, Smallholders, Markets, Transaction costs, Laos and Cambodia
    JEL: N55 H53 I32
    Date: 2012–10
  16. By: Ito, Hiro (Asian Development Bank Institute); Volz, Ulrich (Asian Development Bank Institute)
    Abstract: This paper examines the impact of sectorial reforms on current account imbalances, with a special focus on the People’s Republic of China (PRC). In particular, we investigate to what extent reforms pertaining to the financial sector, social protection, and healthcare may contribute to a rebalancing of the PRC’s persistent current account imbalances. Our forecasting results suggest that reforming the financial sector would be a significant contributor to the country’s rebalancing with an effect much larger than that of capital account liberalization. Strengthened provisions of social protection and publicly-funded healthcare are also found to contribute to a rebalancing of the PRC economy.
    Keywords: global imbalances; prc; current account balance; budget deficit; financial liberalization; social sector reform
    JEL: F32 F41
    Date: 2012–11–05
  17. By: Kirsten Häger (Friedrich Schiller University Jena); Bastiaan Oud (University of Zurich); Daniel Schunk (University of Zurich and University of Mainz)
    Abstract: While envy has been studied extensively in adults, the question how envy develops during childhood has not received much attention. To address this gap, we report the results of an artefactual field experiment that investigates and compares the prevalence and development of destructive envy in children aged seven to ten. The experiment took place in the children's natural environment - their schools. We also checked for cultural variability of our results by conducting our study with German children and with children from a highly egalitarian society: the Eastern Penan of northern Borneo. We found that envious behavior was prevalent already at a young age, even when it was costly. An egalitarian upbringing did not appear to mitigate this prevalence. Furthermore, we found strong evidence of cultural variability in the development of envy in children. For instance, in contrast with the German sample, gender was not associated with envy in the Penan sample and the age pattern of envy differed across our two groups. Together, this suggests that there does not appear to be a straightforward relationship between the development of envy and the natural development of the human mind with age, e.g. through better mentalizing ability. Rather, the acquisition pattern of envy is modulated by socio-cultural context. Further research is needed to identify what, then, drives the development of envy during childhood.
    Keywords: artefactual field experiment, children, envy, egalitarianism, Germany, Penan, Malaysia
    JEL: C91 C99
    Date: 2012–10–26
  18. By: Brishti Guha (Singapore Management University, School of Economics)
    Abstract: Many men invest in their sisters’ children instead of their wives’. Existing theories addressing such behavior depend on the level of paternity probability in such men’s societies being implausibly low. I link this anthropologically observed investment behavior with the experimentally observed phenomenon that some individuals are ambiguity averse. Arguing that men’s decisions are made under ambiguity, I show that an increase in ambiguity aversion results in investment in sisters’, rather than wives’, children. I show that this can happen even under risk neutrality. I also consider the special cases of a SEU maximizer and of extreme ambiguity aversion in the Gilboa-Schmeidler sense. Extremely ambiguity averse individuals invest in sister’s children regardless of risk preference or actual paternity rates. An increase in ambiguity, rather than an increase in ambiguity aversion, in contrast, may affect the investment decision either way. When sufficiently many men are ambiguity averse, inheritance norms could become avuncular, affecting women’s incentives and generating a bias towards actual nonpaternity. This is consistent with, but represents an unusual explanation of, data which show correlations between inheritance norms and actual paternity rates.
    Date: 2012–09

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