nep-sea New Economics Papers
on South East Asia
Issue of 2014‒12‒19
fourteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Connecting South and Southeast Asia : Implementation Challenges and Coordination Arrangements By Moe Thuzar; Rahul Mishra; Francis Hutchinson; Tin Maung Maung Than; Termsak Chalermpalanupap
  2. Dynamic Analysis of Exchange Rate Regimes : Policy Implications for Emerging Countries in Asia By Naoyuki Yoshino; Sahoko Kaji; Tamon Asonuma
  3. Benefit in the wake of disaster: Long-run effects of earthquakes on welfare in rural Indonesia By Gignoux, Jérémie; Menéndez, Marta
  4. Impact of International Oil Price Shocks on Consumption Expenditures in ASEAN and East Asia By Dayong ZHANG; David C. Broadstock
  5. Export Markets and Labor Allocation in a Low-income Country By Brian McCaig; Nina Pavcnik
  6. Bad Investments and Missed Opportunities? Capital Flows to Asia and Latin America, 1950-2007 By Ohanian, Lee E.; Restrepo-Echavarria, Paulina; Wright, Mark L. J.
  7. How can ASEAN and Japan mutually benefit from ASEAN economic integration? By Sato, Hitoshi
  8. Unemployment Insurance, Job Search, and Informal Employment By David Margolis; Lucas Navarro; David A. Robalino
  9. Gender-preferential intergenerational patterns in primary education attainment : a quantitative analysis of a case of rural Mindanao, the Philippines By Okabe, Masayoshi
  10. Achieving Low Emissions Growth for Rice Cultivation in Vietnam: A Role for Behavioural Constraints By Narayan, Tulika; Belova, Anna
  11. Public Health Effects of Natural Resource Degradation: Evidence from Indonesia By Garg, Teevrat
  12. Public Investment as an Engine of Growth By Andrew M. Warner
  13. Constitutional Rights and Education: An International Comparative Study By Sebastian Edwards; Alvaro Garcia Marin
  14. Performance Pay, Competitiveness, and the Gender Wage Gap: Evidence from the United States By McGee, Andrew; McGee, Peter; Pan, Jessica

  1. By: Moe Thuzar (Asian Development Bank Institute (ADBI)); Rahul Mishra; Francis Hutchinson; Tin Maung Maung Than; Termsak Chalermpalanupap
    Abstract: With closer regional integration there is increasing interest within the Association of Southeast Asian Nations (ASEAN) and on the part of ASEAN’s dialogue partners in the potential gains of closer connections between Southeast Asia and South Asia. The strategic positions of India, Myanmar, and Thailand provide the basis and scope for implementing multi-modal connectivity projects, for building upon and improving existing infrastructure and processes for cross-border connectivity in trade. With outward-looking policies in the various subregions that seek to link their economies closer than ever, the ASEAN and South Asian countries are presented with a wide array of options at the bilateral, subregional, and regional levels that can be pursued in partnership under the different frameworks for cooperation. The role of regional entities such as the Asian Development Bank is also important to consider. This paper assesses the political economy and other implications of cross-border connectivity between South and Southeast Asia, and suggests practicable options for moving forward.
    Keywords: cross-border connectivity, South Asia, Southeast Asia, multi-modal connectivity projects, coordination framework
    JEL: F55 H77 H87 O19 P48 R11
    Date: 2014–09
  2. By: Naoyuki Yoshino (Asian Development Bank Institute (ADBI)); Sahoko Kaji; Tamon Asonuma
    Abstract: This paper discusses desirable exchange rate regimes and how countries can shift from their current regimes to these regimes over the medium term. We demonstrate the superiority of a basket-peg regime with the basket weight rule over a floating regime with the interest rate rule or the money supply rule in small open economies, during periods when volatility of exchange rates is moderate. Countries which currently have fixed exchange rates would be better moving toward either a basket-peg or a floating regime over the medium term. A shift to a basket-peg regime is preferred when exchange rate fluctuations are large.
    Keywords: Southeast Asia, East Asia, exchange rate regime, Emerging Countries, basket-peg regime, floating regime
    JEL: E42 F33 F41 F42
    Date: 2014–10
  3. By: Gignoux, Jérémie; Menéndez, Marta
    Abstract: We examine the long-term effects on individual economic outcomes of a set of earthquakes – numerous, large, but mostly not extreme – that occurred in rural Indonesia since 1985. Using longitudinal individual-level data from large-scale household surveys, together with precise measures of local ground tremors obtained from a US Geological Survey database, we identify the effects of earthquakes, exploiting the quasi-random spatial and temporal nature of their distribution. Affected individuals experience short-term economic losses but recover in the medium-run (after two to five years), and even exhibit income and welfare gains in the long term (six to twelve years). The stocks of productive assets, notably in farms, get reconstituted and public infrastructures are improved, seemingly partly through external aid, allowing productivity to recover. These findings tend to discount the presence of poverty traps, and exhibit the potential long-term benefits from well-designed post-disaster interventions in context where disasters primarily affect physical assets.
    Keywords: Catastrophes naturelles; tremblements de terre; Indonésie rural; effets à long terme; bien-être; aide et reconstruction; Natural disasters; earthquakes; rural Indonesia; long-term effects; welfare; aid and reconstruction;
    JEL: I30 L26 O10 Q54
    Date: 2014–10
  4. By: Dayong ZHANG (Research Institute of Economics and Management Southwestern University of Finance and Economics, Chengdu); David C. Broadstock (Research Institute of Economics and Management Southwestern University of Finance and Economics, Chengdu)
    Abstract: This paper examines the impact of international oil shocks on consumption expenditure in selected ASEAN and East Asia economies. By including oil shocks into a standard macroeconomic model of consumption theory, one sees the response of consumption to the changes in the international oil price. Empirical results show that oil shocks do affect consumption and there are asymmetrical effects. There are clear differences in the level and direction of the impacts on each of the ASEAN and East Asia economies. These implications shed light on how the idea of regional energy market integration can be a way to share risks and optimise resource allocation. Nonetheless, given the clear disparity and similarity in sub-groups, integration should be implemented while allowing for differentiation in terms of the role each country plays.
    Keywords: oil shocks, consumption expenditure, permanent income hypotesis ASEAN/East Asia, energy market integration
    JEL: Q4 G12 G14
    Date: 2014
  5. By: Brian McCaig; Nina Pavcnik
    Abstract: We study the effects of an export shock on labor allocation across household businesses and employers in the formal enterprise sector in a low-income country, Vietnam. We find that workers reallocate from household businesses to employers in the formal enterprise sector, with greater reallocation in industries that experience larger declines in U.S. tariffs on Vietnamese exports due to the United States-Vietnam Bilateral Trade Agreement. The reallocation is greater for workers in more internationally integrated provinces and in younger cohorts. Labor productivity of household businesses is relatively low, so our findings suggest this reallocation increases aggregate labor productivity.
    JEL: F14 F16 O17 O47
    Date: 2014–09
  6. By: Ohanian, Lee E. (Stanford University); Restrepo-Echavarria, Paulina (Federal Reserve Bank of St. Louis); Wright, Mark L. J. (Federal Reserve Bank of Chicago)
    Abstract: Theory predicts that capital should flow to countries where economic growth and the return to capital is highest. However, in the post-World War II period, per-capita GDP grew almost three times faster in East Asia than in Latin America, yet capital flowed in greater quantities into Latin America. In this paper we propose a 3-country 2-sector growth model, augmented by “wedges” to quantify and evaluate the importance of international capital market imperfections versus domestic imperfections in explaining this anomalous behavior of capital flows. We find that during the 1950’s capital controls where important, but domestic conditions dominate. And contrary to what has been thought, after 1960 capital controls in Asia encouraged borrowing.
    Keywords: Capital Flows; Return to Capital; East Asia; Latin America.
    JEL: F41 F42 F43 F44
    Date: 2013–11–25
  7. By: Sato, Hitoshi
    Abstract: This paper reviews the evolution of the economic and political relationship between the Association of Southeast Asian Nations (ASEAN) Member States and Japan since the 1970s, from the perspectives of trade in goods and services, foreign direct investment (FDI) and international labour movements. ASEAN economic integration is likely to yield mutual benefits for both ASEAN Member States and Japan. The larger ASEAN market will not only attract new Japanese FDI but also encourage Japanese multinational enterprises to relocate their affiliates, enhancing the agglomeration effect and productivity in the new host economy’s. To fully realize these gains, approrpirate monitoring of the integration process is important. Some extensions of the ASEAN Economic Community deserve consideration to enhance the effect of integration. They include further liberalization in services trade and FDI, arrangements on government procurement and expansion of the scope of international labour movements.
    Keywords: economic integration, regional cooperation, foreign investment, productivity, wages, human resources development, labour migration, trend, ASEAN countries, Japan
    Date: 2014
  8. By: David Margolis (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, IZA - Forschungsinstitut zur Zukunft der Arbeit (Institute for the Study of Labor) - Bonn Universität - University of Bonn); Lucas Navarro (ILADES - Universidad Alberto Hurtado); David A. Robalino (Social Protection and Labor Sector, Human Development Department - The World Bank)
    Abstract: This paper analyses the potential impacts of introducing unemployment insurance (UI) in middle income countries using the case of Malaysia, which today does not have such a system. The analysis is based on a job search model with unemployment and three employment sectors: formal and informal wage employment, and self employment. The parameters of the model are estimated to replicate the structure of the labor market in Malaysia in 2009 and the distribution of earnings for informal, formal and self employed workers. The results suggest that unemployment insurance would have only a modest negative effect on unemployment if benefits are not overly generous. The main effect would be a reallocation of labor from wage into self employment while increasing average wages in the formal and informal sectors.
    Keywords: Unemployment insurance, Informal sector, Self employment, Job search
    Date: 2014–07
  9. By: Okabe, Masayoshi
    Abstract: The Philippines has achieved a relatively high standard of education. Previous researches, most of which deal with Luzon Island, have indicated that rural poverty alleviation began partly due to the increased investment in education. However, the suburban areas beyond Luzon Island have rarely been studied. This study examines a case from rural Mindanao, and investigates the determinants and factors associated with children's education, with a special focus on delays in schooling, which may be a cause of dropout and holdover incidences, as well as exploring gender-specific differential patterns. The result shows that after controlling other socioeconomic attributes, (1) delays in schooling, as well as years completed, are more favorable for girls than boys; (2) the level of maternal education is equally associated with the child(ren)’s education level regardless of their gender; and (3) paternal education is preferentially and favorably influential to the same-gender child(ren), i.e., son(s). To reduce the boy-unfriendly gender bias in primary education, this study suggests two future tasks, i.e., providing boy-specific interventions to enhance the magnitude of the father-son educational virtuous circle, and comparing the magnitude of gender-equal maternal education influence and boy-preferential paternal education influence to specify which effect is larger.
    Keywords: Philippines, Elementary education, Gender, Poverty, Rural societies, Delays in years of schooling, Gender-preferential and intergenerational effect, Primary education, Limited dependent variable regression, Rural Mindanao
    JEL: I20 I21 I29 O53 I24 I25
    Date: 2014–09
  10. By: Narayan, Tulika; Belova, Anna
    Abstract: To support low-emission development strategies (LEDS) in the agriculture sector in Vietnam, this paper estimates marginal abatement cost curves (MACC) for mitigation options for rice cultivation in Vietnam: short-duration rice variety, draining of rice fields and reduced use of fertilizer or alternate wetting and drying (AWD). The MACC, which show the average cost of reducing total greenhouse gas emissions by one unit in rice cultivation in Vietnam, are the first attempt at using representative data on rice management practices and their costs are realized by farmers on the field. Typically, these estimates are usually developed using expert judgment and assuming perfect adoption of the technology. In addition, the MACC uses with region-specific estimates of carbon emissions from rice fields. Furthermore, when estimating the potential for potential for carbon emissions abatement from alternative management practices, we consider the behavioral constraints in adopting management practices, rather than just focusing on the technical potential. Among these potential mitigation options, in the South (An Giang Province), the largest percentage area is under low fertilizer and short-duration variety, followed by short duration with AWD. In the North (Thai Binh Province), majority of the area is under low fertilizer and short-duration variety. In the North, low fertilizer and short-duration variety appear to be production cost-reducing options, but do not have as much mitigation potential compared to alternate wetting and drying (AWD). However, AWD is a production cost-increasing option, implying that farmers may need a financial incentive to adopt AWD. Furthermore, farmers have trouble adopting AWD given its complexity. Therefore, when accounting for adoption constraints for AWD the abatement potential reduces significantly for AWD. This implies that the Government of Vietnam will have to focus on areas and communities that are more likely to adopt these technologies: farmers with ability to control irrigation and farmers with deeper pockets and access to high value markets. In the South, the use of short-duration variety had higher emissions. Short-duration varieties lead to lower methane (CH4) emissions but can have higher nitrous oxide (N2O) emissions. The explanation for this outcome is that the South has more rain and hotter temperatures, which can lead to higher nitrous oxide emissions. Thus, the short-duration variety needs to be revisited as a mitigation option in the South. In particular, this option needs to be combined with reduced fertilizer use to be an effective mitigation option. The application of organic amendments and crop residue management were not practiced much in the South. Therefore, these options could be not be analyzed. Overall, only AWD was a viable option, which is why we did not generate MACCs for the South.
    Keywords: MACC, Marginal Abatement Cost Curve, Rice Cultivate, Climate change mitigation., Agricultural and Food Policy, Crop Production/Industries, Environmental Economics and Policy, Farm Management, International Development,
    Date: 2013
  11. By: Garg, Teevrat
    Abstract: Despite growing concern about the effect of environmental degradation on human health, little effort has been made to quantify the effect of ecosystem damage on public health indicators such as the incidence and burden of infectious diseases. Using village-level panel data and satellite data on forest cover, I find that the average within-sample deforestation results in a 2-4.5\% increase in the probability of malarial outbreak in each village in that district, translating to 360,000 - 880,000 additional infected individuals during the course of this study. The evidence is consistent with an ecological response and the effect of deforestation on malaria cannot be explained by post-deforestation land use change, anti-malarial programs or migration. The effect is specific to malaria, with deforestation having no discernible effect on other diseases (measles, respiratory infections, dengue and diarrhea) whose disease ecology differs from that of malaria. These large effects underscore that forest conservation can have local health benefits in addition to global carbon benefits.
    Keywords: Deforestation, Malaria, Public Health, Environmental Economics and Policy, Health Economics and Policy, International Development, Land Economics/Use, Public Economics,
    Date: 2014
  12. By: Andrew M. Warner
    Abstract: This paper looks at the empirical record whether big infrastructure and public capital drives have succeeded in accelerating economic growth in low-income countries. It looks at big long-lasting drives in public capital spending, as these were arguably clear and exogenous policy decisions. On average the evidence shows only a weak positive association between investment spending and growth and only in the same year, as lagged impacts are not significant. Furthermore, there is little evidence of long term positive impacts. Some individual countries may be exceptions to this general result, as for example Ethiopia in recent years, as high public investment has coincided with high GDP growth, but it is probably too early to draw definitive conclusions. The fact that the positive association is largely instantaneous argues for the importance of either reverse causality, as capital spending tends to be cut in slumps and increased in booms, or Keynesian demand effects, as spending boosts output in the short run. It argues against the importance of long term productivity effects, as these are triggered by the completed investments (which take several years) and not by the mere spending on the investments. In fact a slump in growth rather than a boom has followed many public capital drives of the past. Case studies indicate that public investment drives tend eventually to be financed by borrowing and have been plagued by poor analytics at the time investment projects were chosen, incentive problems and interest-group-infested investment choices. These observations suggest that the current public investment drives will be more likely to succeed if governments do not behave as in the past, and instead take analytical issues seriously and safeguard their decision process against interests that distort public investment decisions.
    Keywords: Public investment;External borrowing;Mexico;Bolivia;Korea, Republic of;Taiwan Province of China;Philippines;Capital expenditure;Infrastructure;Economic growth;Cross country analysis;Public Investment; Infrastructure; Economic Growth; Public Capital; Big Push
    Date: 2014–08–11
  13. By: Sebastian Edwards; Alvaro Garcia Marin
    Abstract: We investigate whether the inclusion of social rights in political constitutions affects social performance. More specifically, we analyze whether including the right to education in the constitution has been related to better "educational outcomes." We rely on data for 61 countries that participated in the 2012 PISA tests. Our results are strong and robust to the estimation technique: we find that there is no evidence that including the right to education in the constitution has been associated with higher test scores. The quality of education depends on socioeconomic, structural, and policy variables, such as expenditure per student, the teacher-pupil ratio, and families' background. When these covariates are excluded, the relation between the strength of constitutional educational rights and the quality of education is negative and statistically significant. These results are important for emerging countries that are discussing the adoption of new constitutions, such as Thailand and Chile.
    JEL: I24 I28 K4 K49 O1 O38
    Date: 2014–09
  14. By: McGee, Andrew (Simon Fraser University); McGee, Peter (National University of Singapore); Pan, Jessica (National University of Singapore)
    Abstract: Evidence that women are less likely to opt into competitive compensation schemes in the laboratory has generated speculation that a gender difference in competitiveness contributes to the gender wage gap. Using data from the NLSY79 and NLSY97, we show that women are less likely to be employed in jobs using competitive compensation. The portion of the gender wage gap explained by gender segregation in compensation schemes is small in the NLSY79 but somewhat larger in the NLSY97 – suggesting an increasing role for competitiveness in explaining the gender wage gap.
    Keywords: gender wage gap, competitiveness, performance pay
    JEL: J16 A12
    Date: 2014–10

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