nep-sea New Economics Papers
on South East Asia
Issue of 2013‒02‒16
ten papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Production Networks, Profits, and Innovative Activity: Evidence from Malaysia and Thailand By Wignaraja, Ganeshan; Krüger, Jens; Tuazon, Anna Mae
  2. Critical Review of East Asia – South America Trade By Hamanaka, Shintaro; Tafgar, Aiken
  3. Varieties of Governance of Public Goods Delivery in Indonesia:The Case of Roads after Decentralization and Local Democratization By Ari Kuncoro; Vid Adrison; Ifa Isfandiarni
  4. The Threat of Financial Contagion to Emerging Asia’s Local Bond Markets: Spillovers from Global Crises By Azis, Iwan J.; Mitra, Sabyasachi; Baluga, Anthony; Dime, Roselle
  5. Profit Gap Analysis on the Small Scale Production of Shallot: A Case Study in a Small Village in East Java Province of Indonesia By Sujarwo; Saghaian, Sayed H.
  6. Automobile and Motorcycle Traffic on Indonesian National Roads: Is It Local or Beyond the City Boundary? By Firman Permana Wandani; Yuichiro Yoshida
  7. Do Aid Donors Coordinate Within Recipient Countries? By Öhler, Hannes
  8. An OLG model of global imbalances By Sara Eugeni
  10. The impact of financial openness on the size of utility-enhancing government By Erauskin, Iñaki

  1. By: Wignaraja, Ganeshan (Asian Development Bank Institute); Krüger, Jens (Asian Development Bank Institute); Tuazon, Anna Mae (Asian Development Bank Institute)
    Abstract: Cross-border production networks have been playing an increasingly important role in the Association of Southeast Asian Nations (ASEAN) countries’ trade in recent years, but micro-level studies are rare. This paper uses firm-level data from the two most active ASEAN countries in production networks (Thailand and Malaysia) and examines the effect of participating in production networks on profits and technological capabilities of firms. The empirical results show that participating in production networks raises profits. The evidence further suggests that participation in production networks is also positively correlated with technology upgrading, measured by a technological capabilities index.
    Keywords: production networks; regional integration; material outsourcing; technology upgrading; malaysia; thailand
    JEL: F10 F23 O14
    Date: 2013–02–03
  2. By: Hamanaka, Shintaro (Asian Development Bank); Tafgar, Aiken (Asian Development Bank)
    Abstract: There is a general consensus that trade between East Asia and South America is becoming increasingly important. However, we know little about the actual dynamic development of this inter-regional trade. This paper examines whether the trend of East Asia–South America trade is a general phenomena or a country- and commodity-specific issue, and whether the increase in trade values has a solid basis in terms of commodity diversification and/or price and quantity effects. While South America has an overall trade surplus with East Asia, detailed country and commodity analysis of inter-regional trade reveal several potential weaknesses in South America’s trade with East Asia. Our research finds that (i) the increase in trade between the two regions can be explained mainly by the increase in the People’s Republic of China’s (PRC) trade with South America, (ii) the increase in the PRC’s imports from South America is limited to a few commodities, (iii) the increase in East Asia’s imports from South America is due partly to commodity price increases, and (iv) the PRC has started to export various types of electronics and machinery products to South America. Overall, East Asia’s exports to South America seem to show more promising signs of growth than South America’s exports to East Asia.
    Keywords: Regional integration/cooperation; trade policy; inter-regional trade; East Asia trade; South America trade
    JEL: F13 F14 F15 O24
    Date: 2013–01–01
  3. By: Ari Kuncoro (Institute of Economic and Social Research, Faculty of Economics, University of Indonesia); Vid Adrison (Institute of Economic and Social Research, Faculty of Economics, University of Indonesia); Ifa Isfandiarni (Institute of Economic and Social Research, Faculty of Economics, University of Indonesia)
    Abstract: For Indonesia the fall of Suharto in 1998 brought dramatic changes in the political landscape. It signified the beginning of transformation from an authoritarian regime towards a more democratic society where the distribution power is more devolved. In this respect Indonesia follow what is called a big-bang approach in the transition. First in the agenda of socio-economic reform is decentralization which changes the relationship between the center and local governments. Next in the country’s reform was democratization at the local government level. In this paper we examine how decentralization and democratization affect governance at the local government level. Our particular interest is to assess the impact of decentralization and local democratization on the quality of road. We find that although the temptation to produce lower quality roads is high the combination of democratization, free media, an ad-hoc anti-corruption agency and well educated bureaucrats keep the quality of roads reasonably good while the corruption is held in check.
    Keywords: Governance, Decentralization, Democratization, Infrastructure Provision
    JEL: D73 H73 O17
    Date: 2013–01
  4. By: Azis, Iwan J. (Asian Development Bank); Mitra, Sabyasachi (Asian Development Bank); Baluga, Anthony (Asian Development Bank); Dime, Roselle (Asian Development Bank)
    Abstract: This paper employs multivariate GARCH models with a BEKK specification to show significant shock and volatility spillovers from mature bond markets into select emerging Asian local currency bond markets. Results reveal that while the growth of individual bond markets in recent years has been impressive, the threat of financial contagion to emerging Asian bond markets from shock and volatility spillovers in mature markets is real. Although emerging Asian local bond market volatilities are more determined by their own respective shocks and volatilities, in some markets the direct shock and volatility spillovers remain significant. An extended analysis also shows indirect spillovers within domestic asset markets and across economies. The results have important implications for the monitoring and coordination of policies, not just within national jurisdictions but also in regional and global settings, in order to maintain financial stability.
    Keywords: Spillovers; contagion; sovereign bond yields and returns; conditional volatility; emerging Asian local currency bond markets; financial crisis
    JEL: C14 E43 E62 G12 G12 H62
    Date: 2013–01–01
  5. By: Sujarwo; Saghaian, Sayed H.
    Abstract: This study attempts to contribute to poverty alleviation through increasing efficiency of input allocation which can raise profit of the small scale farmers without changing the technology they use. Accordingly, this study addresses the problem of allocative inefficiency and profit gap of the farmer’s shallot production. Double-log production function and polynomial cost function are applied to measure the profit gap analysis. The empirical results from double-log production function confirm that land, labor, fertilizer, and pesticide are allocated by farmers inefficiently. Furthermore, three simulations for efficient inputs allocation and profit gap analysis are taken into account based on the costs level spent by the farmers. The result shows that profit gaps are 4.72 percent, 13.96 percent and 17.92 percent for low, middle, and high input costs level, respectively.
    Keywords: Shallot production, double-log production, polynomial cost function, efficient input allocation, profit gap, Production Economics,
    Date: 2013
  6. By: Firman Permana Wandani (Ministry of Public Works); Yuichiro Yoshida (National Graduate Institute for Policy Studies)
    Abstract: This paper investigates the dimensions of private vehicles’ trips on national roads between neighboring cities in Indonesia using the spatial lag model and the spatial error model approach to reveal the spatial correlations among cities. Private vehicles are defined as privately owned automobiles and motorcycles, and vehicle trips or usage levels are defined in terms of vehicle kilometers traveled (VKT) for both types of private vehicles. The paper finds that motorcycle trips are characteristically local because there is no sign of a spatial correlation with neighboring cities for those trips; by contrast, automobile trips often cross city boundaries, although the models constructed in this study demonstrate only weak spatial correlations among neighboring cities for automobile trips. The models also indicate that the road capacity, gasoline prices, gross domestic regional product per capita, population density, city size, number of public buses, and worker resident density have a significant effect on VKT for both cars and motorcycles. Therefore, these findings suggest that in general, the design of urban transportation policies on national roads could be less complex in Indonesian cities because local solutions may be effective for solving traffic problems in individual cities.
    Date: 2013–02
  7. By: Öhler, Hannes
    Abstract: Aid fragmentation and a lack of donor coordination have been widely recognized as principal problems impairing the effectiveness of aid. In particular, the importance of within-country division of labor has been highlighted in recent years. At the same time, rigorous quantitative analyses of within-country aid coordination are largely missing. Taking the whole donor pool(including NGOs) within an aid recipient country into account, we examine the coordination behavior of donors across regions and sectors. Our results indicate a modest degree of donor coordination within Cambodia, even after the 2005 Paris Declaration. In particular, the coordination efforts among bilateral donors seem rather limited, suggesting that their political and economic interests prevent closer coordination. With respect to the behavior of NGOs, we find them to be mainly active in the same regions and sectors as official donors, creating coordination problems between the two groups of donors. In addition, NGOs appear to cluster in the regional-sectoral space although there seems to be some sort of coordination among them.
    Keywords: donor coordination; bilateral donors; multilateral donors; international NGOs; national NGOs; Cambodia
    Date: 2013–01–24
  8. By: Sara Eugeni
    Abstract: In this paper, we investigate the relationship between East Asian countries’ high propensity to save and global imbalances in a two-country OLG model with production. The absence of pay-as-you-go pension systems can rationalize the saving behavior of emerging economies and capital outflows to the United States. The model predicts that the country with no pay-as-you-go system can run a trade surplus only as long as the long-run growth rate of the economy is higher than the real interest rate (capital overaccumulation case). The low real interest rates in the US is evidence in favor of the hypothesis that there is a “global saving glut†in the world economy. The model can also explain why the US current account deteriorated gradually and only in the late 1990s, although the net foreign asset position had already turned negative in the early 1980s. Finally, this analysis implies that the introduction of a pay-as-you-go system in China would have the effect of reducing the imbalances.
    Keywords: global imbalances, capital flows, current account dynamics, OLG model, pay-as-you-go-system
    JEL: F21 F33 F34 F41
    Date: 2013–02
  9. By: Li, Xile; Saghaian, Sayed H.
    Keywords: Price Transmission, Vector Error Correction Model, Coffee, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Institutional and Behavioral Economics, International Development, Land Economics/Use, Research Methods/ Statistical Methods, Resource /Energy Economics and Policy,
    Date: 2013
  10. By: Erauskin, Iñaki
    Abstract: This paper studies the impact of financial openness on the size of government, and other key economic variables, such as the consumption-wealth ratio, the growth rate of wealth, and welfare, in a two-country world, based on a portfolio approach, assuming that public spending is utility-enhancing. The model suggests that the size of government, the consumption-wealth ratio, and welfare should be higher in an open economy due to a higher productivity and/or less volatility through risk sharing. The theoretical results for the growth rate depend on differences on productivities and consumption-wealth ratios. The empirical evidence based on a sample of 50 countries for the period 1970-2009 broadly supports the main theoretical results of the model, even though the inclusion of Singapore distorts sometimes the broad picture. --
    Keywords: Financial openness,productivity,volatility,consumption-wealth ratio,growth,welfare,size of government
    JEL: F41 F43
    Date: 2013

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