nep-sea New Economics Papers
on South East Asia
Issue of 2016‒08‒21
nineteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Real Exchange Rate, Trade Balance and Deindustrialization in Indonesia By Amelia Nurunnisa; Fithra Faisal Hastiadi
  2. Conglopolistic Competition in Small Emerging Economies: When Large and Diversified is Beautiful By Raul V. Fabella
  3. Global and regional pulse economies: Current trends and outlook By Joshi, Pramod Kumar; Rao, P. Parthasarathy
  4. Seaport Status, Access, and Regional Development in Indonesia By Muhammad Halley Yudhistira; Yusuf Sofyandi
  5. The impact of trust, risk and disaster exposure on microinsurance demand: Results of a DCE analysis in Cambodia By Fiala, Oliver; Wende, Danny
  6. Structural transformation and intertemporal evolution of real wages, machine use, and farm size–productivity relationships in Vietnam By Liu, Yanyan; Violette, William; Barrett, Christopher B.
  7. The Impact of Lagging-Region Status on District Poverty in Indonesia By Rus'an Nasrudin
  8. Export Crops and Civil Conflict By Joseph H. Felter; Benjamin Crost
  9. Service Sector Development and its Determinants in Rwanda By Uwitonze, Eric; Heshmati, Almas
  10. Impact Analysis of Normalized Revealed Comparative Advantageon ASEAN’s Non-Oil and Gas Export Pattern Using Gravity-Model Approach By Umar Fachrudin; Fithra Faisal Hastiadi
  11. Does Proximity to Foreign Invested Firms Stimulate Productivity Growth of Domestic Firms? Firm-level Evidence from Vietnam By Daniel Rais
  12. Why Fixed Rent Contracts are Less Prevalent: Weak Third Party Enforcement and Endogenous Principal Type By Raul V. Fabella
  13. Measuring Chronic Hunger from Diet Snapshots: Why 'Bottom up' Survey Counts and 'Top down' FAO Estimates Will Never Meet By John Gibson
  14. Online Supplement to ¡°Pythagorean Generalization of Testing the Equality of Two Symmetric Positive Definite Matrices¡± By JIN SEO CHO; PETER C.B. PHILLIPS
  15. Dynamics of Innovation and Internationalization among Small and Medium-Sized Enterprises in Viet Nam By Trinh, Long Q.
  16. Pythagorean Generalization of Testing the Equality of Two Symmetric Positive Definite Matrices By JIN SEO CHO; PETER C.B. PHILLIPS
  17. Sequentially Testing Polynomial Model Hypotheses using Power Transforms of Regressors By JIN SEO CHO; PETER C.B. PHILLIPS
  18. Common Belief Revisited By Romeo Matthew Balanquit
  19. Threshold Bank-run Equilibrium in Dynamic Games By Romeo Matthew Balanquit

  1. By: Amelia Nurunnisa (Department of Economics, School of Economics and Business, University of Indonesia, Depok, Indonesia); Fithra Faisal Hastiadi (Department of Economics, Faculty of Economics and Business, Universitas Indonesia, Depok, 16424, Indonesia)
    Abstract: This study raises the current issues in Indonesia that links the instability of exchange rates and deindustrialization phenomenon. This association has not been studied directly in previous researches. Using 2SLS method, the study finds that these problems are interrelated and cannot be separated from each other. Deindustrialization problems in Indonesia, which are explained by the decline in manufacturing exports, decline in manufacturing labor productivity, trade balance deficit and investment displacement from the tradable sector (manufacturing), directly and indirectly affect exchange rate. The implication of this study is that government should pay attention to Indonesian manufacturing sector in solving exchange rate problem.
    Keywords: deindustrialization, exchange rate, manufacturing, 2SLS, trade balance
    Date: 2016–06
  2. By: Raul V. Fabella (School of Economics, University of the Philippines Diliman; National Academy of Science and Technology)
    Abstract: The economic catch-up of the East Asian miracle economies went hand-in-hand with the emergence and even dominance of large private or quasi-state business groups such as the Zaibatsus in the pre-WWII and the Keiretsus of the post-WWII Japan, the Chaebols of South Korea and the Taipan-led business empires of South and South East Asia. The dominance of the so-called Robber Barons in the Gilded Age of the USA catch-up era (1870-1900) was of the same genre. The natural vent for size among firms, following the Williamson make or buy logic, manifests itself as vertical integration in large economies; in small economies, it manifests itself as horizontal integration or conglomeracy. The motivations are underdeveloped factor mainly capital and insurance markets. Weak public ordering also motivates size as firms to vertically integrate into private ordering to resist official and unofficial predation. Conglopolistic competition, the competition among conglomerates in many markets, is largely in the non-traded goods sectors where foreign competition is not felt and market saturation is quickly attained. We give show how conglopolistic competition is welfare-improving and give examples of how it boosts the collective action capacity of the weak Philippine state. The dynamism of the Philippine Service sector is due to lively conglopolistic competition which in turn comes from relatively free entry (apart from large capital cost) in these sectors. It is imperative to attract conglopolistic competition in the traded goods sector especially in industrial agriculture. We identify fragmentation of farm land and the 5-hectare ownership ceiling as the one barrier preventing the entry of conglopolistic competition in agriculture.
    Keywords: Conglomerates, horizontal integration, small emerging markets, conglopolism, non-traded goods sector
    JEL: L22 L25
    Date: 2016–06
  3. By: Joshi, Pramod Kumar; Rao, P. Parthasarathy
    Abstract: The pulse sector is undergoing dynamic changes globally and in several regions and countries to meet the challenge of growing demand in the face of sluggish production growth. Realizing the importance of pulses in the human diet, 2016 has been declared the International Year of Pulses (IYP). This report captures the dynamics of the pulse sector during the last three decades. The examination of pulse supply, demand, uses, trade, prices, and outlook would help researchers and policy makers make more informed decisions related to the sector. Pulse-based food is an important source of dietary protein and essential minerals, particularly for the vegetarian population. At the global level, the average share of pulses is only 5 percent of the total protein consumption but their contribution in several developing countries range between 10 and 40 percent. To meet the growing demand and raise their per capita availability, countries made efforts to increase production and explore trade opportunities to augment domestic supply. Overall between 1980 and 2013, pulses production at the global level grew at an annual rate of 1.3 percent but there were, however, two phases of pulses production at the global level. While there was almost a period of stagnation in production of pulses during the1990s, production has sharply increased since 2005. The bulk of the increase in production came from developing countries where both area and yield growth (from a low base) contributed to the production. For developed countries—where production also grew—the center of production shifted from Europe to North America and Oceania. For developing countries, two new centers of production emerged in Eastern Africa and Southeastern Asia (Myanmar).
    Keywords: pulses, forecasting, trade, developing countries, supply balance, forecasting, productivity, protein content, food consumption, diet, nutrition, developed countries, prices, pulses area, pulse uses, per capita availability, trade in pulses, pulses demand and supply,
    Date: 2016
  4. By: Muhammad Halley Yudhistira (Institute for Economic and Social Research (LPEM), School of Economics and Business, University of Indonesia); Yusuf Sofyandi (Institute for Economic and Social Research (LPEM), School of Economics and Business, University of Indonesia)
    Abstract: As the biggest archipelago nation, Indonesia considers port infrastructure one of the most important infrastructures in bolstering the regional economic development. In this paper, we study the impacts of access to the existing port infrastructure on regional development, i.e. income per capita, productivity, and poverty at district level in Indonesia. While other similar studies use the size of seaport, we argue that the access may be much more important. Additionally, using access variable accommodates spillover effect of the seaport for landlocked district. We define access to the nearest port as the shortest distance of the respective district to the nearest port. Our estimation results show that proximity to the main ports provides positive effect on GDP per capita, labor productivity, poverty rate, and poverty rate. We also find the importance of ports may vary between Java and non-Java regions.Length: 14 pages
    Keywords: seaport status, distance, regional economic development, seaport access, Indonesia
    Date: 2016–05
  5. By: Fiala, Oliver; Wende, Danny
    Abstract: Natural disasters are increasing in frequency and intensity and have devastating impacts on individuals, both humanitarian and economic, particularly in developing countries. Microinsurance is seen as one promising instrument of disaster risk management, however the level of demand for respective projects remains low. Using behavioural games and a discrete choice experiment, this paper analyses the demand for hypothetical microinsurance products in rural Cambodia and contributes significant household level evidence to the current research. A general preference for microinsurance can be found, with demand significantly affected by price, provider, requirements for prevention and combinations with credit. Furthermore, financial literacy, risk aversion, levels of trust and previous disaster experience impact the individual demand for flood insurance in rural Cambodia.
    Keywords: microinsurance,trust,risk,discrete choice experiment,Cambodia
    JEL: Q10 Q50 Q54 O10 C25
    Date: 2016
  6. By: Liu, Yanyan; Violette, William; Barrett, Christopher B.
    Abstract: This paper explores the evolution of real agricultural wages, machinery use, and the relationship between farm size and productivity in Vietnam during its dramatic structural transformation over the course of the 1990s and 2000s. Using six rounds of nationally representative household survey data, we find strong evidence that the inverse relationship between rice productivity and planting area attenuated significantly over this period and that the attenuation was most pronounced in areas with higher real wages. This pattern is also associated with sharp increases in machinery use, indicating a scale-biased substitution effect between machinery and labor. The results suggest that rural-factor market failures are receding in importance, making land concentration less of a cause of concern for aggregate food production.
    Keywords: VIET NAM, VIETNAM, SOUTH EAST ASIA, ASIA, productivity, structural change, farm size, food production, households, mechanization,
    Date: 2016
  7. By: Rus'an Nasrudin (PhD Scholar, Arndt-Cordent Department of Economics, The Australian National University)
    Abstract: Reducing imbalances of development progress across regions is one of important policy agenda Indonesia. This paper examines the impact of policy that assign lagging-region status namely status daerah tertinggal (DT) on poverty rate and poverty gap among districts in Indonesia in the two period of SBY presidency. The panel data fixed effect combined with propensity score matching is used to tackle the selection bias due to the nature of the policy, unobserved heterogeneity and omitted variable bias. The results show that the lagging-region status that was aimed to mainstream central and district’s budget toward lagging regions statistically significant reduces poverty rate and poverty gap in the period. The DT status, on average is associated with 0.75 percentage point of reduction in the poverty rate and 7% reduction in the poverty gap index.
    JEL: I32 P48
    Date: 2016–06
  8. By: Joseph H. Felter (Stanford University); Benjamin Crost (University of Illinois at Urbana-Champaign)
    Abstract: Many governments and international experts consider a move towards high-value export crops, such as fruits and vegetables, as an important opportunity for economic growth and poverty reduction. Little is known, however, about the effects of export crops in fragile and conflict- affected countries. We exploit movements in world market prices combined with geographic variation in crop intensity to provide evidence that increases in the value of a major export crop exacerbate conflict violence in the Philippines. We further show that this effect is concentrated in areas with low baseline insurgent control. In areas with high insurgent control, a rise in crop value leads to a decrease in violence but a further expansion of rebel-controlled territory. These results are consistent with the hypothesis that insurgents gain strength from extorting agricultural exporters and that insurgent strength has a non-monotonic effect on conflict violence because strong insurgent groups can establish local monopolies of violence.
    Keywords: Philippines; Export Crops, Civil Conflict, Insurgent Control, Bananas
    JEL: N55 F10 F51
    Date: 2016–08
  9. By: Uwitonze, Eric (Ministry of Gender and Family Promotion, Kigali-Rwanda); Heshmati, Almas (Jönköping University, Sogang University)
    Abstract: The service sector is an avenue for economic transformation as not all countries have a competitive edge in manufacturing. The growing literature on service sector primarily focuses on its development in the US and Europe and on Asian emerging service economies like India. Not as much attention has been paid to the role that services can play in the economic growth of African countries primarily due to the high prevalence of agriculture in these countries. But with avenues of structural adjustments and globalization, some African countries have become service-based economies. Services are considered as an alternative to manufacturing-led development in Rwanda since its aims is to become a service-based hub to serve countries in the East African Community (EAC). Recently, the growth rate of the service sector has been impressive in the Rwandan economy. The present study is an attempt to study in detail the development of the service sector over the years in Rwanda's economy and empirically estimate its determinants by using an econometric methodology. The empirical results are based on micro-data collected during the Rwanda Enterprise Survey 2011 and the 2014 Establishment Census. The survey has data on 241 firms and establishments. Linear and limited dependent variable techniques are employed to investigate the factors behind the development of the service sector. Models are specified and estimated to assess the factors contributing to sales growth, innovation and turnovers of service firms. The results show the factors that have contributed to the development of the service sector. These factors can be used in forming public policy with the aim of using the service sector as a vehicle for speeding up the shift from a low income to a middle income state.
    Keywords: limited dependent variables, services, openness, growth, East Africa, Rwanda
    JEL: C35 F13 G29 O47 O55
    Date: 2016–08
  10. By: Umar Fachrudin (Center for Foreign Trade Policy, Ministry of Trade, Republic of Indonesia); Fithra Faisal Hastiadi (Department of Economics, Faculty of Economics and Business, Universitas Indonesia, Depok, 16424, Indonesia)
    Abstract: The development of global economic challenges hasforced ASEAN countries to further deepen its economic integration within the ASEAN Economic Cooperation (AEC) and to incorporate several ASEAN Plus agreements into Regional Comprehensive Economic Partnership (RCEP). Under thiscircumstance, the ASEAN members need to distinguish how the difference in comparative advantage of each export commodity affects and influences the pattern of ASEAN’s non-oil exports. This study attempts to identify the impact of comparative advantage, represented by Normalized Revealed Comparative Advantage (NRCA) index, on the non-oil export pattern of the ASEAN countries using the augmented gravity model as its research method. The results indicate that comparative advantage has a positive influence on ASEAN’s non-oil exports and that the comparative advantages in agricultural commodities have the biggest influence.
    Keywords: seaport status, distance, regional economic development, seaport access, Indonesia
    Date: 2016–05
  11. By: Daniel Rais
    Abstract: SECO Working Paper No. 10/2016 by Stephan Kyburz and Huong Quynh Nguyen
    Date: 2016–08–16
  12. By: Raul V. Fabella (School of Economics, University of the Philippines Diliman; National Academy of Science and Technology)
    Abstract: We revisit the question of why fixed rent contracts are less prevalent than crop share contracts despite Marshallian inefficiency. We consider the case where the type of the principal is endogenous to contract provisions and reneging by the principal may pay due to weak third party enforcement (TPE). We imbed the quality of TPE into the participation constraint of the agent in an effort-in-advance P-A model. The governance regime explicitly involves interplay of three categories of the Northian enforcement, viz., first, second and third party enforcement. Weak and strong TPE are formally defined. We show that the general contract derived nests the usual textbook contract when TPE is strong; weak TPE on the other hand results in a strictly positive induced risk aversion which always exceeds the inherent risk aversion of the agent. This prevents the power of the contract to equal one even when the agent is risk-neutral, thus, rendering a fixed-rent contract sub-optimal.
    Keywords: sharecropping, weak TPE, endogenous type, induced risk aversion
    JEL: D23 D82 D86
    Date: 2016–08
  13. By: John Gibson (University of Waikato)
    Abstract: Widely used global hunger estimates from the FAO are ‘top down’ in that they combine data on each country’s total food balance with variance estimates from household surveys. Food balance sheets are only annual so the FAO just estimate the prevalence of chronic hunger. These estimates are criticized and recent research advocates ‘bottom up’ counts of hunger directly from household consumption surveys. These surveys give a snapshot of living standards, for the week, fortnight or month reference period, so only noisy measures of annual dietary energy can be derived from them. This overstated between-households variance raises the share of the population who appear below nutritional standards, for any standard set below the median, and so overstates chronic hunger. In this paper, a new method of deriving chronic hunger estimates from snapshot surveys is proposed, which also lets the transient component of hunger be identified. This method is demonstrated using a household survey from Myanmar that has repeated observations on households during the year. The transient component of hunger is almost one-half of the total and uncorrected snapshot surveys would overstate the chronic hunger rate by almost 90 percent.
    Keywords: chronic hunger; survey design; transient hunger; undernourishment
    JEL: C81 O15 Q18
    Date: 2016–08–09
  14. By: JIN SEO CHO (Yonsei University); PETER C.B. PHILLIPS (Yale University University of Auckland, Singapore Management University & University of Southampton)
    Abstract: This supplement provides proofs of the subsidiarly lemmas and the main results given in the text of ¡°Pythagorean Generalization of Testing the Equality of Two Symmetric Positive Definite Matrices¡± by Cho and Phillips (2016).
    Date: 2016–08
  15. By: Trinh, Long Q. (Asian Development Bank Institute)
    Abstract: This paper examines the bidirectional causality between innovation and internationalization in the context of developing countries. Using a dynamic bivariate probit model and adopting a broad definition of internationalization, this paper analyzes these issues using a panel dataset of small and medium-sized enterprises in Viet Nam. The results show a high persistence in process and product innovations and internationalization decisions. Furthermore, we find that, for non-micro firms, past internationalization has a positive effect on process innovation, but past process innovation does not have a significant effect on the internationalization decision. For this group of firms, we also find signs of cross-dependence between process innovation and the internationalization decision. Our results, however, do not show dynamic interdependence between internationalization and product innovation.
    Keywords: SME internationalization and innovation; process innovation; cross-dependence; product innovation
    JEL: L20 L25 O31
    Date: 2016–08–16
  16. By: JIN SEO CHO (Yonsei University); PETER C.B. PHILLIPS (Yale University University of Auckland, Singapore Management University & University of Southampton)
    Abstract: We provide a new test for equality of two symmetric positive-definite matrices that leads to a convenient mechanism for testing specification using the information matrix equality and the sandwich asymptotic covariance matrix of the GMM estimator. The test relies on a new characterization of equality between two k dimensional symmetric positive-definite matrices A and B: the traces of AB-1 and BA-1 are equal to k if and only if A = B. Using this criterion, we introduce a class of omnibus test statistics for equality and examine their null and local alternative approximations under some mild regularity conditions. A preferred test in the class with good omni-directional power is recommended for practical work. Monte Carlo experiments are conducted to explore performance characteristics under the null and local as well as fixed alternatives. The test is applicable in many settings, including GMM estimation, SVAR models and high dimensional variance matrix settings.
    Keywords: Matrix equality; Trace; Determinant; Arithmetic mean; Geometric mean; Harmonic mean; Sandwich covariance matrix; Eigenvalues.
    JEL: C01 C12 C52
    Date: 2016–08
  17. By: JIN SEO CHO (Yonsei University); PETER C.B. PHILLIPS (Yale University University of Auckland, Singapore Management University & University of Southampton)
    Abstract: We provide a methodology for testing a polynomial model hypothesis by extending the approach and results of Baek, Cho, and Phillips (2015; BCP) that tests for neglected nonlinearity using power transforms of regressors against arbitrary nonlinearity. We examine and generalize the BCP quasi-likelihood ratio test dealing with the multifold identification problem that arises under the null of the polynomial model. The approach leads to convenient asymptotic theory for inference, has omnibus power against general nonlinear alternatives, and allows estimation of an unknown polynomial degree in a model by way of sequential testing, a technique that is useful in the application of sieve approximations. Simulations show good performance in the sequential test procedure in identifying and estimating unknown polynomial order. The approach, which can be used empirically to test for misspecification, is applied to a Mincer (1958, 1974) equation using data from Card (1995). The results confirm that Mincer¡¯s log earnings equation is easily shown to be misspecified by including nonlinear effects of experience and schooling on earnings, with some flexibility required in the respective polynomial degrees.
    Keywords: QLR test; Asymptotic null distribution; Misspecification; Mincer equation; Nonlinearity; Polynomial model; Power Gaussian process; Sequential testing.
    JEL: C12 C18 C46 C52
    Date: 2016–08
  18. By: Romeo Matthew Balanquit (School of Economics, University of the Philippines Diliman)
    Abstract: This study presents how selection of equilibrium in a game with many equilibria can be made possible when the common knowledge assumption (CKA) is replaced by the notion of common belief. Essentially, this idea of pinning down an equilibrium by weakening the CKA is the central feature of the global game approach which introduces a natural perturbation on games with complete information. We argue that since common belief is another form of departure from the CKA, it can also obtain the results attained by the global game framework in terms of selecting an equilibrium. We provide here necessary and sufficient conditions. Following the program of weakening the CKA, we weaken the notion of common belief further to provide a less stringent and a more natural way of believing an event. We call this belief process as iterated quasi-common p-belief which is a generalization to many players of a two-person iterated p-belief. It is shown that this converges with the standard notion of common p-belief at a sufficiently large number of players. Moreover, the agreeing to disagree result in the case of beliefs (Monderer & Samet, 1989 and Neeman, 1996a) can also be given a generalized form, parameterized by the number of players.
    Keywords: common p-belief; common knowledge assumption; global games
    JEL: D83 C70
    Date: 2016–08
  19. By: Romeo Matthew Balanquit (School of Economics, University of the Philippines Diliman)
    Abstract: This study sets a bank-run equilibrium analysis in a dynamic and incomplete information environment where agents can reconsider attempts to run on the bank over time. The typical static bank-run model is extended in this paper to capture the learning dynamics of agents through time, giving bank-run analysis a more realistic feature. Apart from employing a self-fullling framework in this model, where agents' actions are strategic complements, we allow agents to update over time their beliefs on the strength of the fundamentals that is not commonly known. In particular, we extend the bank-run model analyzed by Goldstein and Pauzner (Journal of Finance 2005) and build it on a dynamic global games framework studied by Angeletos (Econometrica 2007). We present here how a simple recursive setup can generate a unique monotone perfect Bayesian Nash equilibrium and show how the probability of bank-run is a¤ected through time by the inow of information and the knowledge of previous state outcome. Finally, it is also shown that when an unobservable shock is introduced, multiplicity of equilibria can result in this dynamic learning process.
    Keywords: threshold bank-run, monotone perfect Bayesian Nash equilibrium, dynamic global games
    JEL: C73 D82 G10
    Date: 2016–08

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