nep-sea New Economics Papers
on South East Asia
Issue of 2014‒09‒29
thirteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Mining and Indonesia’s Economy: Institutions and Value Adding, 1870-2010 By Eng, Pierre van der
  2. Service Sector Productivity and Economic Growth in Asia By Jong-Wha Lee; Warwick J. McKibbin
  3. The Impact of Minimum Wages on Investment and Employment in Indonesia By Andi Sukmana; Ichihashi Masaru
  4. Does Timing of Health and Family Planning Services Matter? Age at First Birth and Educational Attainment in Indonesia By Christoph Strupat
  5. Public goods and ethnic diversity: evidence from deforestation in Indonesia By Alberto Alesina; Caterina Gennaioli; Stefania Lovo
  6. Accelerating MDGs achievement in Asia and the Pacific: the role of public expenditure By Macroeconomic Policy and Development Division
  7. The Role of Public Sector Investment for Economic Development in Emerging Countries: The Case of Lao PDR By Osamu Nakamura
  8. The Structural Relationship between Nutrition, Cognitive and Non-cognitive Skills Evidence from four developing countries (Documento de trabajo 111 – La relación estructural entre nutrición, habilidades cognitivas y habilidades no cognitivas) By Alan Sánchez
  9. Population Management, RH Law, and Inclusivity By Ernesto M. Pernia
  10. Children’s Multidimensional Health and Medium-Run Cognitive Skills in Low- and Middle-Income Countries (Documento de Trabajo 129 – Salud multidimensional de los niños y sus habilidades cognitivas en el mediano plazo) By Elisabetta Aurino; Francesco Burchi
  11. The Picketty Inequality in the Nash-Bargained Social Contract By Raul V. Fabella
  12. Welfare-to-Work Reform and Intergenerational Support: Grandmothers’ Response to the 1996 PRWORA By Christine Ho
  13. Is an Increasing Capital Share under Capitalism Inevitable? By Yew-Kwang NG

  1. By: Eng, Pierre van der
    Abstract: Indonesia has long been a major producer of minerals for international markets. Starting in 2014, it implemented legislation banning exports of unprocessed minerals and requiring producers to invest in processing facilities to add more value before export. This paper establishes what light past experiences in Indonesia with mining sheds on this recent development. It quantifies and discusses the growth of mining production in Indonesia since 1870. It analyses the institutional arrangements that past governments used to maximise resource rents and domestic value adding. The paper finds that production and exports of mining commodities were long dominated by oil, but increased and diversified over time, particularly since the 1960s. The development of the mining sector depended on changes in market prices, mining technologies and the cost of production, but particularly on the institutional arrangements that guided the decisions of foreign investors to commit to mining production and processing in Indonesia.
    Keywords: natural resources, mining sector, Indonesia, resource rents
    JEL: L71 L72 L78 N55 O13 Q32
    Date: 2014–08
  2. By: Jong-Wha Lee (Asian Development Bank Institute (ADBI)); Warwick J. McKibbin
    Abstract: This paper explores the impacts of more rapid growth in labor productivity in the service sector in Asia based on an empirical general equilibrium model. The model allows for input–output linkages and capital movements across industries and economies, and consumption and investment dynamics. We find that faster productivity growth in the service sector in Asia benefits all sectors eventually, and contributes to the sustained and balanced growth of Asian economies, but the dynamic adjustment is different across economies. This adjustment depends on the sectoral composition of each economy, the capital intensity of each sector, and the openness of each sector to international trade. In particular, during the adjustment to higher services productivity growth, there is a significant expansion of the durable manufacturing sector that is required to provide the capital stock that accompanies the higher aggregate economic growth rate.
    Keywords: the service sector, Labour Productivity, general equilibrium model, balanced growth
    JEL: J21 O11 O14 O41 O53
    Date: 2014–07
  3. By: Andi Sukmana (Graduate School for International Development and Cooperation, Hiroshima University); Ichihashi Masaru (Graduate School for International Development and Cooperation, Hiroshima University)
    Abstract: The labor market in Indonesia cannot absorb all of the labor force available, which allows employers to have greater bargaining power over employees. To protect and to increase labor welfare, the government issued minimum wages regulation. Although the purposes of the minimum wage policy were widely accepted, there is great disagreement about whether the minimum wage is effective in achieving its objectives. We found that the minimum wage policy in Indonesia has a positive impact on the average wage. 1 percent of the increase of the minimum wage will increase the average wage by 0.71-0.98 percent. The minimum wage has a negative impact on employment to the working age population ratio. 1 percent of the increase of the minimum wage will decrease the employment to population ratio by 0.62?0.76 percent. The minimum wage only affects total investment. Total investment will decrease 0.09% if the minimum wage increases by 1%.
    Keywords: Average Wage, Employment, Investment, Labor, Minimum Wage
    Date: 2014–09
  4. By: Christoph Strupat
    Abstract: This paper examines empirically whether midwifes, as an integral part of the health and family planning programs in Indonesia, are effective in advising young women to delay their first birth and also influence the decision on post-primary school attendance. Using the Indonesian Family Life Survey, I investigate the extent to which the exogenous expansion of a midwife program affects the age at first birth and the number of school years of women. My findings suggest that women who were exposed to a midwife when they have to decide on further school attendance (age 13-20) delay their first birth and also stay longer in post-primary school. According to the average returns of education in Indonesia, I conclude that family planning services provided by midwifes can generate large socioeconomic benefits by allowing young women to postpone their first birth.
    Keywords: Family planning; midwifes; fertility; education
    JEL: J13 I12 O12
    Date: 2014–08
  5. By: Alberto Alesina; Caterina Gennaioli; Stefania Lovo
    Abstract: We show that the level of deforestation in Indonesia is positively correlated with the degree of ethnic fractionalization of the communities. We explore several channels that may link the two variables. They include the negative effect of ethnic fractionalization on the ability to coordinate and organize resistance against logging companies and a higher level of corruption of politicians less controlled in more fragmented communities.
    Date: 2014–09
  6. By: Macroeconomic Policy and Development Division (Macroeconomic Policy and Development Division, United Nations Economic and Social Commission for Asia and the Pacific)
    Abstract: Although as a region the Asia-Pacific has done well and is an early achiever in most of the MDGs, many countries have not done as well in health related indicators. In fact, some of the countries have regressed, for example in the reduction of HIV and malaria prevalence rate. In the case of maternal and infant mortality, many countries in the region are off-track or slow and will not achieve the targets by 2015.
  7. By: Osamu Nakamura (International University of University)
    Abstract: Recently, the Lao PDR has achieved high economic growth at around 7-8 percent annually which is very stable and robust growth in Asian economic dynamics, in particular in ASEAN. Vital public investments play an important role to develop social infrastructures and then strengthen the supply-side economy. This paper analyzes the macroeconomic structure and causes of high economic growth of Lao PDR by utilizing a macroeconometric model. According to the econometric analysis, vital public sector investment behaviors have caused to strengthen the supply-side economy and exports, which resulted in foreign capital and public investment increases through its virtuous circle.
    Keywords: public sector investment, take-off stage, macroeconometric model, scenario simulation, co-integrating relationships
    JEL: E17 E51 C01
    Date: 2014–09
  8. By: Alan Sánchez (GRADE)
    Abstract: Aunque tanto las habilidades cognitivas como las no cognitivas son recompensadas en el mercado laboral, existe poca evidencia acerca de cómo se forman estas habilidades en los países en desarrollo. Sánchez ha estudiado la forma en que las habilidades cognitivas y no cognitivas se adquieran simultáneamente en la transición de la niñez a la adolescencia a partir de los datos longitudinales de los cuatro países del estudio Young Lives / Niños del Milenio (Perú, India, Vietnam y Etiopía).Asimismo, el autor estimó una versión lineal de la tecnología de la formación de habilidades entre lo que se observó de los niños cuando tenían 7 a 8 años, y las resultados que arrojaron cuando cumplieron 11 o 12 años y nuevamente cuando tenían 14 o 15 años. Se encontró una evidencia de auto-productividad, principalmente, para las habilidades cognitivas y el cruce de productividad para ambos tipos de habilidades. Así, el papel de estado nutricional es importante para la adquisición de habilidades. Luego, la talla respecto de la edad es relevante para adquirir habilidades, teniendo un efecto tanto directo como indirecto en la acumulación de conocimientos. Para obtener estimaciones de los efectos a largo plazo de las inversiones de nutrición durante el período de la primera infancia en las habilidades posteriores, se utilizó pruebas reunidas a partir de un segundo modelo que vincula la talla para la edad en los primeros años del niño con su capacidad cognitiva posteriormente, a los 7 u 8 años. Vinculando los resultados de ambos modelos, parece que un aumento en 1 de la desviación estándar en la talla/edad en la primera infancia de los niños, tiende a aumentar las habilidades cognitivas durante la adolescencia en un 6%, 9%, 17% y 7% en Perú, India, Vietnam y Etiopía, respectivamente. También aumenta las habilidades no cognitivas en un 2% y un 4% en la India y Vietnam, respectivamente. Este documento fue presentado en la Conferencia sobre Inequidades en los Resultados de los Niños en Países en Vías de Desarrollo auspiciado por Young Lives, St Anne´s College, Oxford el 8-9 julio de 2013.
    Date: 2013
  9. By: Ernesto M. Pernia (School of Economics, University of the Philippines Diliman)
    Abstract: Taking off from the self-evident fact that the population variable centrally figures in both labor and product markets, this paper argues that the growth rate of population, its age structure and spatial distribution should be key considerations in a country’s development strategy to promote rapid and sustained economic growth, full employment, poverty reduction, and social inclusion. This represents a shift from the inordinate emphasis on the demand for labor, i.e., job creation. Significantly reducing unemployment and poverty can be achieved not solely through job generation but also by managing the quantity and quality of the work force, which is determined, with a lag, by the growth rate and structure of the population. The paper provides a perspective on population as it impacts the labor market and poverty. It then discusses issues of fertility and unmet needs for family planning and reproductive health services in relation to poverty. A sidelight on pressing concerns (gender-based violence and lack of RH services) brought about by Super-typhoon Yolanda is presented. This is followed by a glimpse into regional experience in population policy, family planning and poverty as exemplified by Thailand and Bangladesh. The penultimate section provides simulations and projections using different assumptions of contraceptive prevalence rates that result in various scenarios of fertility and population growth.
    JEL: J1 J2 J6 O1 O2
    Date: 2014–06
  10. By: Elisabetta Aurino; Francesco Burchi
    Abstract: Este documento de trabajo analiza los efectos que tiene la salud de los niños en países de bajos y medianos ingresos durante sus primeros años sobre su educación en el mediano plazo. El estudio usa las tres rondas de la base de datos del estudio Niños del Milenio en Etiopía, India, Perú y Vietnam con un enfoque multidimensional de la salud (y la pobreza en general). El documento de trabajo tiene un cuádruple objetivo: (1) explorar si en nuestra muestra de esos cuatro países se mantiene la relación positiva entre la talla de los niños (que indica su grado de nutrición) y las habilidades cognitivas en los niveles preescolar y en edad escolar primaria que se encuentra en previas investigaciones; (2) evaluar si los indicadores de salud y nutrición adicionales, raramente disponible o utilizado en la literatura existente, se asocian significativamente con los logros cognitivos posteriores; (3) examinar si la contribución de la salud multidimensional de los niños a sus logros cognitivos en el mediano plazo se puede resumir de forma adecuada en un índice compuesto de privación material; (4) investigar algunos de los posibles canales por los cuales la salud de la primera infancia puede afectar las habilidades cognitivas de los niños. De forma consistente con la literatura principal, las estimaciones muestran un efecto positivo y altamente significativo de la talla para la edad de los niños entre 6 y 18 meses en casi todas las variables dependientes, tanto en la edad preescolar y en la escolar primaria. Fue más informativo, asimismo, que se estudiaron los datos desde una perspectiva multidimensional. Además, la desnutrición aguda (peso para la talla), es un importante predictor de los resultados de aprendizaje de los niños, especialmente en la India, Perú y Vietnam. Sin embargo, la variable de salud final, que indica si el niño había sufrido una grave enfermedad, solo ayuda a explicar las calificaciones de matemáticas en Vietnam. Se construyó un índice de privación de la salud global, basado en una versión revisada del método Alkire-Foster. Si bien se asocia con una variedad de resultados en los distintos países, el índice resultó ser sustancialmente menos informativo que el ‘conjunto de indicadores’. Finalmente, el documento arroja algo de luz sobre los factores que median la relación entre las condiciones de salud de la primera infancia y las capacidades cognitivas en la vida posterior. Se sugiere que el nivel de educación formal asistido / completado es un canal importante, pero en la mayoría de los casos, la inclusión de las variables relacionadas con la escolarización en las estimaciones no invalida la asociación entre la salud de la primera infancia y el nivel cognitivo en los años siguientes. Este hallazgo sustenta los efectos de largo plazo del grado de la salud y la nutrición de la infancia en la formación de habilidades de las personas durante su vida.
    Date: 2014
  11. By: Raul V. Fabella (School of Economics, University of the Philippines Diliman)
    Abstract: As a proxy for a Pareto-efficient market economy, we adopt the two-party Nash Bargaining model featuring a qualitative bias in the treatment of the contributions of the parties. The Piketty inequality here is the share in total welfare accruing to the richer party over total welfare attained at agreement point. We show that this inequality can never exceed the inequality in initial contributions if the qualitative bias is zero. The rising Piketty inequality requires that the qualitative bias exceed a positive threshold. The Piketty trajectory emerges if the qualitative bias oscillates around the threshold due to changing social and economic environment.
    Keywords: Piketty, Inequality, Nash Bargaining
    JEL: C78 D31 D63 D71
    Date: 2014–09
  12. By: Christine Ho (School of Economics, Singapore Management University, Singapore, 178903)
    Abstract: The 1996 Personal Responsibility and Work Opportunity Reconciliation Act in the US aimed at encouraging work among low income mothers with children aged below 18. In this paper, we use a sample of 2,843 intergenerational family observations from the Health and Retirement Study to estimate the effects of the reform on single grandmothers who are related to those mothers. The results suggest that that the reform decreased time transfers but increased money transfers from grandmothers. Our results are consistent with an intergenerational family support network where higher child care subsidies motivated the family to shift away from grandmothe provided child care, and where grandmothers increased money transfers to either help cover the remaining cost of formal care or to partly compensate for the loss in benefits of welfare leavers.
    Keywords: child care, indirect intent-to-treat effects, intergenerational family, welfare reform
    Date: 2014–09
  13. By: Yew-Kwang NG (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological Univer- sity. Address: 14 Nanyang Drive, Singapore, 637332.)
    Abstract: Piketty’s influential book Capital in the Twenty-First Century and its prominent review by Milanovic in the Journal of Economic Literature both assert the inevitability of an increasing share of capital in total income, given a higher rate of return to capital than the rate of growth in income. This paper shows by a specific example, a logical argument and its intuition that the alleged inevitability is not valid. Even just for capital to grow faster than income, we need an additional requirement that saving of non-capital income is larger than consumption of capital income. Even if this is satisfied, the capital share may not increase as the rate of return may fall and non-capital incomes may increase with capital accumulation.
    Keywords: capital; capitalism; distribution; income; wealth
    JEL: D3 P1
    Date: 2014–10

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