nep-sea New Economics Papers
on South East Asia
Issue of 2013‒08‒10
twelve papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Negotiations for the Trans-Pacific Partnership Agreement : Evaluation and Implications for East Asian Regionalism By Inkyo Cheong
  2. Early Marriage and Education Transitions of Female Youth: The Case of Indonesia By Chris SAKELLARIOU
  3. Trends in Poverty and Inequality in Decentralising Indonesia By Riyana Miranti; Yogi Vidyattama; Erick Hansnata; Rebecca Cassells; Alan Duncan
  4. Trust and Trustworthiness Under The Prospect Theory and Quasi-Hyperbolic Preferences: A Field Experiment in Vietnam By Quang NGUYEN; Marie Claire VILLEVAL; Hui XU
  5. Farmland loss and livelihood outcomes: A microeconometric analysis of household surveys in Vietnam By Tran, Tuyen; Lim, Steven; Cameron, Michael P.; Vu, Huong
  6. A Macro Assessment of China Effects on Malaysian Exports and Trade Balances By Chan, Tze-Haw; Lean, Hooi Hooi; Hooy, Chee Wooi
  7. After the Farm Crisis: Religiosity in the Rural United States By Orman, Wafa Hakim
  8. RED vs. REDD: Biofuel Policy vs. Forest Conservation By Dixon, Peter; van Meijl, Hans; Rimmer, Maureen; Shutes, Lindsay; Tabeau, Andrzej
  9. Banking Crises and “Japanization†: Origins and Implications By Masahiro Kawai; Peter Morgan
  10. Unions and Union Benefits As Part of The Inclusive Growth Strategy: The Case of Singapore By CHEW Soon Beng; Aaron NEO
  11. The Self-Image Signaling Roles of Voice in Decision-Making By Qiyan ONG; Yohanes Eko RIYANTO; Walter E. THESEIRA; Steven M. SHEFFRIN
  12. Why Is Finance Important? Some Thoughts on Post-Crisis Economics By Yew-Kwang NG

  1. By: Inkyo Cheong (Asian Development Bank Institute (ADBI))
    Abstract: The Trans-Pacific Partnership (TPP) agreement seems to have reached a crossroads : it could either be a building block toward achieving economic integration in Asia and the Pacific, or trigger the formation of two large trade blocs which will work independently of one another. When the Government of Japan announced its participation in the TPP negotiations in March 2013, the partnership began to attract greater interest from other East Asian countries. This paper analyzes the progress and major issues regarding the current TPP negotiations which are being led by the United States, and draws implications for East Asian economic integration. The paper argues that the TPP should be promoted for its economic value, not for geopolitical purposes. It should be open to all Asia and Pacific countries, including the People’s Republic of China, the second-largest economy in the world and a growth engine for the world economy. The scope and coverage of the TPP should also be wide and comprehensive enough to induce a domino effect for economic integration in Asia and the Pacific.
    Keywords: Trans-Pacific Partnership Agreement, TPP, East Asian Regionalism, economic integration, China, Japan
    JEL: F15 F53 O53
    Date: 2013–07
  2. By: Chris SAKELLARIOU (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore)
    Abstract: I explore the association of early marriage of girls in Indonesia with the probability of passing education transitions using a sequential logit model; I first establish that in Indonesia, due to the socio-cultural and religious environment, marriage is the primary reason for exiting school for the majority of girls married before the age of 18 (and a minority of girls married later). I find that girls who married early are associated with extremely low odds of passing education transitions compared to boys, never married girls and girls who marry later; the estimates are even more unfavourable in the presence of unobserved heterogeneity.
    Keywords: Early marriage, education transitions, sequential response model, Indonesia.
    JEL: I24 J12
    Date: 2013–04
  3. By: Riyana Miranti; Yogi Vidyattama; Erick Hansnata; Rebecca Cassells; Alan Duncan
    Abstract: As one of the world’s largest emerging economies, Indonesia has experienced rapid economic growth and substantial reduction of poverty over the past three decades, particularly prior to the 1997-98 Asian Financial Crisis. After the crisis, Indonesia entered a new development phase that saw the fall of the Suharto government and new governance which moved highly centralised policies and powers towards a decentralised process. This research report analyses economic and social patterns and trends of poverty and inequality in Indonesia with a particular focus on the decentralisation period from 2001 to 2010.The Indonesian political and economic environment has changed significantly during this period and this had implications for individual wellbeing, regional economic prosperity and national economic growth. The report finds that in general, absolute poverty rates have continued to decline during the decentralisation period although the reduction has not been as strong as it was prior to the Asian economic crisis. In contrast, consumption inequality has increased during the same period. New estimates of growth and inequality elasticity of poverty suggest that this rising inequality has been offsetting the positive benefits of consumption growth on poverty.<BR>En tant que l'une des plus grandes économies émergentes du monde, l'Indonésie a connu une croissance économique rapide et une réduction substantielle de la pauvreté au cours des trois dernières décennies, en particulier avant la crise financière asiatique de 1997-1998. Après cette crise, l'Indonésie est entrée dans une nouvelle phase de développement qui a vu la chute du gouvernement Suharto, et qui a connu une nouvelle gouvernance délaçant des politiques et des pouvoirs fortement centralisés vers un processus décentralisé. Ce rapport analyse les caractéristiques et tendances économiques et sociales de la pauvreté et de l'inégalité en Indonésie, avec un accent particulier sur la période de décentralisation de 2001 à 2010. L’environnement politique et économique indonésien a considérablement changé au cours de cette période. Cela a eu des répercussions sur le bien-être individuel, la prospérité économique régionale et à la croissance économique nationale. Le rapport constate qu'en général, les taux de pauvreté absolue ont continué à baisser au cours de la période de décentralisation, mais la baisse n'a pas été aussi forte qu'elle l'avait été avant la crise économique asiatique. En revanche, les inégalités (mesurées par la consommation) ont augmenté durant la même période. Des nouvelles estimations de la croissance et de l'élasticité de l'inégalité de la pauvreté suggèrent que cette inégalité croissante a compensé les effets positifs de la croissance de la consommation sur la pauvreté.
    Keywords: poverty, inequality, regional disparities, poverty alleviation strategy
    JEL: I32 I38 R12
    Date: 2013–07–23
  4. By: Quang NGUYEN (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore); Marie Claire VILLEVAL (University of Lyon, F-69007, France; CNRS, GATE, 93, ChemindesMouilles, F-69130, Ecully, France; IZA, Bonn, Germany); Hui XU (University of Lyon, F-69007, France; CNRS, GATE, 93, ChemindesMouilles, F-69130, Ecully, France. Beijing Normal University,19 XinjiekouWai Street, Beijing 100875, P. R. China.)
    Abstract: This study incorporates risk, time, and social preferences. We conduct a field experiment in Vietnamese villages and estimate the effect of the Cumulative Prospect Theory and of quasi-hyperbolic time preferences parameters on trust and trustworthiness. We find that both probability sensitivity and risk aversion are not related to trust. Yet, more risk averse and less present biased participants are found to be trustworthier. People with longer exposure to a collectivist economy tend to have a lower level of trust and trustworthiness.
    Keywords: Trust, Trustworthiness, Cumulative Prospect Theory, Risk preferences, Time preferences, Quasi–hyperbolic preferences, Vietnam, Field experiment
    JEL: C91 C93 D81 D90
    Date: 2013–01
  5. By: Tran, Tuyen; Lim, Steven; Cameron, Michael P.; Vu, Huong
    Abstract: Although there has been much discussion in the literature about the impacts of farmland loss (due to urbanization) on household livelihoods, no econometric evidence of these effects has been provided thus far. This paper, hence, is the first to quantify the effects of farmland loss on household livelihood outcomes in peri-urban areas of Hanoi, Vietnam. Our study found no econometric evidence for negative effects of farmland loss on either income or expenditure per capita. In addition, the results show that farmland loss has an indirect positive impact on household welfare, via its positive impact on the choice of nonfarm based-livelihoods.
    Keywords: Farmland loss, livelihood, household, Vietnam
    JEL: D1
    Date: 2013–08–01
  6. By: Chan, Tze-Haw; Lean, Hooi Hooi; Hooy, Chee Wooi
    Abstract: This paper focuses on the impact of China’s export expansion on Malaysian monthly trading with to her 12 major trading partners over the liberalization era. Structural break(s) found mostly coincides with the Asia financial crisis and China’s accession into WTO and, regime shifts are evident in the long run relationship among the variables being studied. While the income effects are more apparent, real exchanges are rather insignificant and incorrectly signed for Malaysian bilateral trading. An attempt to correct current account imbalances by currency devaluation would thereby inappropriate. In addition, estimation of the trade balance models is more superior that complementary China effects are better captured for Malaysia trading with the advanced markets such as Australia, German, Japan, UK and the US. Such finding may partly due to the increase in global product fragmentation
    Keywords: Malaysian trading, China effect, cointegration, VAR, structural break
    JEL: C51 F41
    Date: 2013–04–01
  7. By: Orman, Wafa Hakim (University of Alabama in Huntsville)
    Abstract: The farm crisis in the United States in the 1980s had profound effects on rural, agricultural regions of the country, but almost no impact on urban and suburban areas. I use a difference-in-difference methodology and find that religiosity as measured by religious attendance increased significantly in areas impacted by the crisis for those who worked in agriculture. Chen (2010) describes increased religiosity in Indonesia following the 1998 financial crisis, and this paper demonstrates a similar response to severe financial distress in the United States. I also find evidence that this increase is not due to a lower opportunity cost of time, as those who are currently employed have higher levels of attendance than those who are not. I hypothesize that the increased religiosity results from religious institutions' ability to provide public goods, both financial and emotional, in the form of community support.
    Keywords: religious attendance, financial distress, farm crisis, religiosity
    JEL: J22 Q12 Z12
    Date: 2013–07
  8. By: Dixon, Peter; van Meijl, Hans; Rimmer, Maureen; Shutes, Lindsay; Tabeau, Andrzej
    Abstract: This paper assesses the complex interplay between global Renewable Energy Directives (RED) and the United Nations programme to Reduce Emissions from Deforestation and forest Degradation (REDD). We examine the interaction of the two policies using a scenario approach with a recursive-dynamic global Computable General Equilibrium model. The consequences of a global biofuel directive on worldwide land use, agricultural production, international trade flows, food prices and food security out to 2030 are evaluated with and without a strict global REDD policy. We address a key methodological challenge of how to model the supply of land in the face of restrictions over its availability, as arises under the REDD policy. The paper introduces a flexible land supply function, which allows for large changes in the total potential land availability for agriculture. Our results show that whilst both RED and REDD are designed to reduce emissions, they have opposing impacts on land use. RED policies are found to extend land use whereas the REDD policy leads to an overall reduction in land use and intensification of agriculture. Strict REDD policies to protect forest and woodland lead to higher land prices in all regions. World food prices are slightly higher overall with some significant regional increases, notably in Southern Africa and Indonesia, leading to reductions in food security in these countries. This said, real food prices in 2030 are still lower than the 2010 level, even with the RED and REDD policies in place. Overall this suggests that RED and REDD are feasible from a worldwide perspective, although the results show that there are some regional problems that need to be resolved. The results show that countries directly affected by forest and woodland protection would be the most economically vulnerable when the REDD policy is implemented. The introduction of REDD policies reduces global trade in agricultural products and moves some developing countries to a net importing position for agricultural products. This suggests that the protection of forests and woodlands in these regions reverses their comparative advantage as they move from being land-abundant to land-scarce regions. The full REDD policy setting, however, foresees providing compensation to these countries to cover their economic losses.
    Date: 2013–05
  9. By: Masahiro Kawai (Asian Development Bank Institute (ADBI)); Peter Morgan
    Abstract: Japan’s “two lost decades†perhaps represent an extreme example of a weak recovery from a financial crisis, and are now referred to as “Japanization.†More recently, widespread stagnation in advanced economies in the wake of the global financial crisis led to fears that Japanization might spread to other countries. This study examines the dimensions of Japanization—including low trend growth, debt deleveraging, deflation, and massive increases in government debt—and analyzes their possible causes—including inadequate macroeconomic policy responses, delayed banking sector restructuring, inadequate corporate investment, loss of industrial competitiveness, a slowdown in total factor productivity (TFP) growth due to excessive regulation and economic rigidities, and an aging society. The study compares Japan’s experience with three other groups that experienced banking crises in the 1990s—developed economies; emerging Asian economies and Latin American economies. Japan’s experience is found to parallel most closely that of other Asian economies that experienced unusually high growth rates of gross domestic product (GDP) and credit before their crises. The study also develops an econometric model of long-term growth rates that uses measures of net investment, the share of the aged in the population, and occurrence of banking crises in addition to traditional explanatory variables. It finds that very low rates of consumer price index (CPI) inflation (or deflation) and net investment, the lack of openness to foreign direct investment, and an aged population explain much of Japan’s slowdown.
    Keywords: Japan, lost decades, Japanization, global financial crisis, macroeconomic policy responses, banking crisis
    JEL: E20 E31 E51 F31 G01
    Date: 2013–07
  10. By: CHEW Soon Beng (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore); Aaron NEO (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore)
    Abstract: Singapore has been able to achieve full employment, and her actual rate of unemployment is often quite close to her natural unemployment rate (Groenewold and Tang, 2004). The island country has been able to achieve this because her wage costs are fully flexible. During periods of growth, the country enjoys wage increases, and during periods of recession, wage costs are permitted to fall to protect employment. However, business cycles are becoming shorter and more extreme. Singapore needs more and more foreign workers to act as a buffer for employment. Consequently, the low-income workers in Singapore suffer even when there is full employment because the higher cost of living during such periods is exacerbated by depressed wages brought about by the presence of foreign workers. Low-wage workers also suffer in periods of recession because their take-home pay is significantly reduced. In other words, Singapore does not have inclusive growth. Hence, the government has to increase public spending in order to help the poor. The strategy of relying on foreign workers, combined with increasing globalization has caused the Gini coefficient in Singapore to rise. Singapore needs an additional instrument to enable her to look after the welfare of the low-income workers. Her labour unions can play a role in this regard. This paper presents a scenario which shows that, in addition to the wages and worker benefits that are provided by employers, the labour movement can help to mitigate the hardship caused the strategy of relying excessively on foreign workers by providing union benefits to workers and union members alike. These union benefits are like country club benefits in the sense that workers decide on joining the union in much the same way as deciding to join a country club, as the laour union is like a big country club. The paper will present evidence of the country club benefits provided by the unions to the workforce in Singapore as part of the inclusive growth strategy.
    Keywords: macro -focused unions, non-collective bargaining benefits, union benefits
    JEL: J08 J33 J51
    Date: 2013–02
  11. By: Qiyan ONG (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore); Yohanes Eko RIYANTO (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore); Walter E. THESEIRA (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore); Steven M. SHEFFRIN (Murphy Institute, Department of Economics at Tulane University, 108 Tilton Hall, New Orleans, LA 70115)
    Abstract: Why are individuals willing to pay costs in order to express their voice in decision-making settings? Research suggests voice provides a strategic opportunity to improve outcomes, or the perceived fairness of outcomes. This paper proposes that people are willing to expend resources to express their views to learn about themselves through “self-image signaling.” We distinguish between these differing interpretations of voice through a modified ultimatum game where responders are assigned opportunities to bid for voice, either to the proposer or to a third party. Strikingly, 63% of responders are willing to pay on average 34% of their endowments for the opportunity for voice, even when their messages are sent to a third party and thus hold no strategic value. The act of expressing voice appears to change a responder’s willingness to accept offers, suggesting that voice’s effects on self-image could be as important as any strategic or communications function.
    Keywords: Voice, Self-image, Signaling
    JEL: D03 C91
    Date: 2013–03
  12. By: Yew-Kwang NG (Division of Economics, Nanyang Technological University, Singapore 637332, Singapore)
    Abstract: The global financial crisis around 2008 and the subsequent great recession have forced attention on the relevance of economics. In particular, the core of economic theory suggests that money is neutral (affecting only the price level but not real economic variables) and hence finance and financial crises are not very important. This papers shows that this neutrality is based on the unrealistic institutional assumption of perfect competition. Relaxing this alone (without time lags, price rigidities, menu costs, and other frictions) makes money no longer necessarily neutral and hence makes finance and financial crisis much more important. The presence of increasing returns to scale at the firm level and to specialization at the economy level due to the division of labour also makes finance much more important than suggested by traditional economics. It also makes pecuniary external effects possibly of efficiency relevancy. The reasons for these are explained using simple analyses.
    Keywords: Finance; financial crisis; economics; relevance; money.
    JEL: G00 G01 E30 E50 D40
    Date: 2013–05

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