nep-sea New Economics Papers
on South East Asia
Issue of 2016‒02‒17
nine papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Property rights, collateral and interest rates. Evidence from Vietnam By Hainz, Christa Maria; Danzer, Alexander
  2. Trade Invoicing in the Major Currencies in the 1970s-1990s: Lessons for renminbi internationalization By ITO Hiroyuki; KAWAI Masahiro
  3. The Effect of Peer Observation on the Consumption of Temptation Goods: Experimental Evidence By Grohmann, Antonia Charlotte; Sakha, Sahra
  4. Bias-corrected estimation in mildly explosive autoregressions By Kruse, Yves Robinson; Kaufmann, Hendrik
  5. Crucial for Modern Sector Development? The Role of Exports and Institutions in Developing Countries By Grundmann, Rainer; Gries, Thomas
  6. Providing Insurance for Good Repayment Performance: The Individual Emergency Fund, Philippines By Kemper, Niels; Frölich, Markus; Naima Unte, Pia
  7. Subjective Well-being in China, 2005-2010: The Role of Relative Income, Gender and Location By Asadullah, Niaz; Xiao, Saizi; Yeoh, Emile Kok-Kheng
  8. Leader Networks and Transaction Costs: A Chinese Experiment in Interjurisdictional Contracting By Chau, Nancy; Qin, Yu; Zhang, Weiwen
  9. Greying the Budget: Ageing and Preferences over Public Policies By de Mello, Luiz; Schotte, Simone; Tiongson, Erwin R.; Winkler, Hernan

  1. By: Hainz, Christa Maria; Danzer, Alexander
    Abstract: This paper investigates the causal effect of the quality of property rights on the price of collateralized consumer loans. Identification stems from exogenous variation in the improvement of property rights in Vietnam following recent accelerations of the land titling program as well as political change in provincial leaderships. We exploit a unique data set which comprises the complete loan data of one of the largest private Vietnamese banks, regional level information on the quality of property rights and legal institutions as well as an exact measure of bank competition derived from the complete relevant georeferenced bank data of Vietnam. Our findings clearly indicate that more secure property rights reduce the cost of credit, and these results are very robust to the inclusion of competition in our regression model. Owing to an institutional peculiarity of the Vietnamese banking practice, we support our findings with a falsification exer-cise on employer-insured loans.
    JEL: O16 D23 G21
    Date: 2015
  2. By: ITO Hiroyuki; KAWAI Masahiro
    Abstract: In this paper, we investigate how much a major national currency is used for trade invoicing by focusing primarily on the experiences of the U.S. dollar, Japanese yen, and Deutsche mark (DM) in the 1970s through the 1990s. We then attempt to draw lessons for China's renminbi (RMB) internationalization. Our data on the shares of the three major currencies in export invoicing show that the dollar has unequivocally been a global invoicing currency, the DM was a major regional currency in Europe, while the yen has neither been a global nor regional currency. DM invoicing was driven by European countries' trade ties with Germany. In contrast, the yen was not and is still not widely used for trade invoicing by Asia-Oceania countries, even including Japan itself, despite the region's strong trade ties with Japan. Our regression analysis on the determinants of the major currency share for trade invoicing (also including UK pound, French franc, Italian lira, and Swiss franc) in the 1970-1998 period suggests that the invoicing share of a major currency tends to be positively affected by the degree of other economies' trade ties with the major currency country and negatively affected by the degree of their financial development or openness. Also, the major currency share for trade invoicing is affected by both the weight of the major currencies in the implicit currency baskets of other economies or these economies' trade shares with major-currency zone countries. Economies belonging to the U.S. dollar zone tend to invoice their trade more in the dollar and less in the DM, while the opposite is observed for economies in the DM zone. The use of yen for trade invoicing is not much affected by its currency weight or the trade share with currency zones. European countries largely belonged to the DM zone, thereby contributing to higher DM use for trade invoicing, whereas Asia-Oceania countries belonged mainly to the U.S. dollar zone, leading to a lower degree of yen use. We also find that major currency countries tend to invoice their trade in their own currencies when they have a large presence in international trade and high levels of per capita income, and when their financial markets are more developed and at the same time are sufficiently open. Furthermore, major currency countries with high trade shares with U.S. dollar zone countries tend to invoice their exports less in their own currencies. For China, its low level of per capita income and limited financial openness as well as the presence of the U.S. dollar bloc in Asia stand as a big challenge to the nation's ambition to promote the RMB as a major regional or global trade-invoicing currency.
    Date: 2016–01
  3. By: Grohmann, Antonia Charlotte; Sakha, Sahra
    Abstract: This paper uses a clean experiment to investigate the impact of peer observation on the consumption decisions of rural households in Thailand. We find that those groups that observe each other show lower within group standard deviation in their decisions. At the same time, we also find that individual choice is influenced by group choice. We find that unfamiliarity with product is counteracted by peer effects. Those in a group that have higher cognitive ability are able to resist peer temptation.
    JEL: D12 C21 D85
    Date: 2015
  4. By: Kruse, Yves Robinson; Kaufmann, Hendrik
    Abstract: This paper provides a comprehensive Monte Carlo comparison of different finite-sample biascorrection methods for autoregressive processes. We consider situations where the process is either mildly explosive or has a unit root. The case of highly persistent stationary is also studied. We compare the empirical performance of the plain OLS estimator with an OLS and a Cauchy estimator based on recursive demeaning, as well as an estimator based on second differencing. In addition, we consider three different approaches for bias-correction for the OLS estimator: (i) bootstrap, (ii) jackknife and (iii) indirect inference. The estimators are evaluated in terms of bias and root mean squared errors (RMSE) in a variety of practically relevant settings. Our findings suggest that the indirect inference method clearly performs best in terms of RMSE for all considered orders of integration. If bias-correction abilities are solely considered, the jackknife works best for stationary and unit root processes. For the explosive case, the bootstrap and the indirect inference can be recommended. As an empirical application, we study Asian stock market overvaluation during bubbles and emphasize the importance of bias-correction for explosive series.
    JEL: C13 C22 G12
    Date: 2015
  5. By: Grundmann, Rainer; Gries, Thomas
    Abstract: Over the past decades there has been ample evidence that a manufacturing sector plays an important role in overall development. In East Asia, recent job creation in industry has lifted large parts of the population to higher income levels. However, while this connection is well supported by anecdotal evidence as well as empirical and theoretical research, there is less evidence on what exactly supports modern sector development. With cross-country time-series data for 75 developing countries we analyze whether international trade and institutions, both the subject of much discus- sion in the general development debate, play a special role in manufacturing sector growth. Our estimation results, produced using an instrumental approach that is less susceptible to endogeneity issues, show that indeed both exports and institutions are vital for a manufacturing sector. Our results also provide interesting insights into the role of natural resources and official development aid.
    JEL: O14 C23 F15
    Date: 2015
  6. By: Kemper, Niels; Frölich, Markus; Naima Unte, Pia
    Abstract: Asymmetric information impairs the functioning of credit markets, in particular in developing countries where incomplete property rights and lack of collateral are a common joint occurrence. In such an environment financial institutions enable lending by transferring the responsibilities for the screening and monitoring of the borrowers as well as the enforcement of credit contracts, to the borrowers themselves to ease problems of asymmetric information. This comprises non-collateral based lending methodologies such as peer monitoring through co-signers (Klonner and Rai, 2010) and, especially, peer screening and monitoring in individual and joint liability group lending with the possibility to impose social sanctions (Gin and Karlan, 2014). In addition, improved personal identification through fingerprints may alleviate credit market imperfections (Gin et al., 2012). These approaches have in common that they rely on the punishment of non-compliance with credit contracts as principle enforcement mechanism, e.g. through legal action or social sanctions. They contrast with alternative mechanisms which reward compliance, rather than punishing non-compliance, with credit contracts. One example is dynamic incentives, i.e. offering bigger loans sizes to clients when the build up a positive credit history. Another example, and subject to this impact evaluation, is conditioning gratuitous insurance provision for the client through the financial institution on clients' good standing with the financial institution (clients are in good standing if they are neither in arrears nor completely defaulted on their loans). We evaluate the impact of such a conditional insurance provision on the repayment performances of microfinance clients in a Randomized Controlled Trial. The impact evaluation employs weekly data on the financial activities of roughly 22000 clients in 700 client centers from the management information system (MIS) of the microfinance institution. To evaluate the impact of the IEF on clients, we complement the weekly MIS data with weekly data on a subsample of 500 to 700 clients collected through phone surveys.
    JEL: D12 G21 O12
    Date: 2015
  7. By: Asadullah, Niaz (University of Malaya); Xiao, Saizi (University of Malaya); Yeoh, Emile Kok-Kheng (University of Malaya)
    Abstract: We use data from two rounds of the Chinese General Social Survey (CGSS) to study the determinants of subjective well-being in China over the period 2005-2010 during which self-reported happiness scores show an increase across all income groups. Ordered probit regression analysis of well-being reveals large influence of gender, rural residency and household income. After controlling for demographic attributes, health, unemployment status, household size, agricultural hukou (household registration identity) and education status, household assets, the influence of past and future income and province dummies, we find that women, urban residents and people with higher income are happier in China. More schooling, better health and being employed are positively and significantly correlated with well-being. Sub-sample s reveals that the rich only care about relative income whereas the effect of absolute income dominates in case of the poorer section. The influence of absolute income is larger among women compared to men and in turn explains why women, despite being poorer, are happier in China, conditional on socio-economic differences. On the other hand, rural residents are poorer than urban residents so that conditional on having the same income, there is no rural-urban happiness gap. Our results suggest that while further decline in poverty will enhance well-being in China, policies that reduce rural-urban and gender inequalities are also likely to boost well-being.
    Keywords: gender, happiness, inequality, poverty, unemployment, well-being
    JEL: O12 I30 I31
    Date: 2016–01
  8. By: Chau, Nancy (Cornell University); Qin, Yu (National University of Singapore); Zhang, Weiwen (Zhejiang University)
    Abstract: Do leader networks promote efficient intergovernmental contracts? We examine a groundbreaking policy in China where subprovincial governments freely traded land conversion quotas, and investigate the role of leader networks on the boundary between jurisdictions that embrace trade versus autarky. Consistent with the presence of Williamsonian transaction costs featuring uncertainty, incomplete contracting, and asset specificity, we find that leader career networks facilitate trade, controlling for institutional similarity and prior trade relations. However, trade gains can be limited if leader networks offer selective coverage. Using data from the Chinese experiment, we find evidence consistent with trade match distortions induced by leader networks.
    Keywords: transaction cost, government leader network, interjurisdictional contracting
    JEL: H11 H77 P35 R52 D23
    Date: 2016–01
  9. By: de Mello, Luiz (OECD); Schotte, Simone (German Institute of Global and Area Studies (GIGA)); Tiongson, Erwin R. (Georgetown University); Winkler, Hernan (World Bank)
    Abstract: This paper looks at how individual preferences for the allocation of government spending change along the life cycle. Using the Life in Transition Survey II for 34 countries of Europe and Central Asia, we find that older individuals are less likely to support a rise in government outlays on education and more likely to support increases in spending on pensions. These results are very similar across countries, and they do not change when using alternative model specifications, estimation methods and data sources. Using repeated cross‐sections, we control for cohort effects and confirm our main results. Our findings are consistent with a body of literature arguing that conflict across generations over the allocation of public expenditures may intensify in ageing economies.
    Keywords: ageing, public spending, cohort effects
    JEL: H3 H5 J14
    Date: 2016–01

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