nep-sea New Economics Papers
on South East Asia
Issue of 2017‒05‒28
fifteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Local Institutional Quality and Return Migration: Evidence from Vietnam By Ngoc Thi Minh Tran; Michael P. Cameron; Jacques Poot
  2. Ethnic Horizontal Inequity in Indonesia By Christophe Muller
  3. Structural Change, Fundamentals and Growth: A Framework and Case Studies By Margaret McMillan; Dani Rodrik; Claudia Sepulveda
  4. An Empirical Investigation of Risk Sharing among Indonesian Households By Parantap Basu; Sigit S. Wibowo
  5. Inequality of Opportunity in Health in Indonesia By Sabine Mage-Bertomeu; Marta Menéndez; Florence Jusot
  6. Convergence of public and private enterprise wages in a transition economy: Evidence from a distributional decomposition in Vietnam, 2002–2014 By Vu, Tien Manh; Yamada, Hiroyuki
  7. Education as Protection? The Effect of Schooling on Non-Wage Compensation in a Developing Country By Dang, Thang
  8. Bayesian Assessment of Lorenz and Stochastic Dominance By David Lander; David Gunawan; William Griffiths; Duangkamon Chotikapanich
  9. The Opening-up of ASEAN and Hub-Spoke Trade Pattern among By 黃登興; 黃幼宜; 蔡青龍
  10. Viet Nam's Automotive Supplier Industry: Development Prospects under Conditions for Free Trade and Global Production Networks By Martin Schröder
  11. Status Goods: Experimental Evidence from Platinum Credit Cards By Leonardo Bursztyn; Bruno Ferman; Stefano Fiorin; Martin Kanz; Gautam Rao
  12. Lessons Unlearned? Corporate Debt in Emerging Markets By Alfaro, Laura; Asis, Gonzalo; Chari, Anusha; Panizza, Ugo
  13. Downstream activities: The possibilities and the realities By Olle Östensson; Anton Löf
  14. Global Perspective of CPEC Regarding Economic Integration and Trade Openness By Rabbi, Muhammad Ahsan
  15. Settling for Academia? H-1B Visas and the Career Choices of International Students in the United States By Catalina Amuedo-Dorantes; Delia Furtado

  1. By: Ngoc Thi Minh Tran (University of Waikato); Michael P. Cameron (University of Waikato); Jacques Poot (University of Waikato)
    Abstract: This paper examines the link between local institutional quality in the home country and locational choices of international return migrants. We scrutinize the locational choices of Vietnamese return migrants to the south central and the south regions in 2014. Binary and multinomial regression models are fitted to identify the influence of migrants’ individual attributes and the characteristics of regional destinations within Vietnam, with the main focus placed on regional institutional quality. Our analysis reveals that both individual-specific and region-specific variables are significantly related to Vietnamese return migrants’ choices when registering for permanent residency back in their home country. Older migrants are more likely to return to regions other than the central city, as are male migrants. More remarkably, we provide compelling evidence of the positive role of institutional quality at the local level in these migration decisions. Moreover, the effect of institutional quality differs by the characteristics of migrants: regions with better institutional quality are more attractive to younger return migrants, and to those who returned from host countries with better institutional quality. Our findings are strongly robust across different econometric specifications and alternative measures of host country institutional quality at the national level.
    Keywords: return migration; institutional quality; locational choice; Vietnam
    JEL: F22 O15 R23
    Date: 2017–05–15
  2. By: Christophe Muller (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - CNRS - Centre National de la Recherche Scientifique - ECM - Ecole Centrale de Marseille - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)
    Abstract: For the first time in Indonesia, we jointly analyse several economic statistics and ethnic diversity indicators at national and local levels. Nationally, we find very high levels of economic inequality, measured from household asset values or consumption expenditure. In contrast, the levels of ethnic diversity, while non-negligible, are much lower, whether they reflect fractionalization, polarization, or horizontal inequity based on individual living standards. All horizontal inequity indicators surged after the Asian economic crisis. Horizontal inequity based on education is much lower and decreasing. Finally, we provide tentative explanations of local horizontal inequity in regressions that show a mixed pattern of socioeconomic influences.
    Keywords: community activities,ethnic diversity,inequality,Indonesia
    Date: 2017–03
  3. By: Margaret McMillan; Dani Rodrik; Claudia Sepulveda
    Abstract: Developing countries made considerable gains during the first decade of the 21st century. Their economies grew at unprecedented rates, resulting in large reductions in extreme poverty and a significant expansion of the middle class. But more recently that progress has slowed with an economic environment of lackluster global trade, not enough jobs coupled with skills mismatches, continued globalization and technological change, greater income inequality, unprecedented population aging in richer countries, and youth bulges in the poorer ones. This essay examines how seven key countries fared from 1990-2010 in their development quest. The sample includes seven developing countries—Botswana, Ghana, Nigeria, Zambia, India, Vietnam and Brazil —all of which experienced rapid growth in recent years, but for different reasons. The patterns of growth are analyzed in each of these countries using a unifying framework which draws a distinction between the “structural transformation” and “fundamentals” challenge in growth. Out of these seven countries, the traditional path to rapid growth of export oriented industrialization only played a significant role in Vietnam.
    JEL: O11
    Date: 2017–05
  4. By: Parantap Basu (Durham University, Durham University Business School); Sigit S. Wibowo (Universitas Indonesia, Depok)
    Abstract: This study investigates the barriers to risk-sharing among Indonesian households. We test alternative risk sharing models, namely full risk sharing, borrowing-saving, saving only, hidden income, moral hazard and limited commitment among households. Based on three waves of the Indonesia Family Life Survey (IFLS) dataset, we nd that the full risk-sharing hypothesis fails. A nested regression framework suggested by Kinnan (2014) provides evidence in favor of the hidden income hypothesis. However, such a nested framework is unable to discriminate between moral hazard and limited commitment. This motivates us to resort to a non-nested framework. Within this non-nested framework, we test two risk sharing models: (i) the Kocherlakota-Pistaferri (2010) moral hazard model with full commitment and (ii) the Ligon et al. (2002) dynamic limited commitment model. IFLS data reject (i) but there is weak evidence of (ii). Based on this, we conclude that there are two hidden barriers to risk sharing among the IFLS households, namely hidden income and limited commitment.
    Date: 2017–05
  5. By: Sabine Mage-Bertomeu (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine); Marta Menéndez (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine); Florence Jusot (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine)
    Abstract: Whereas health equity issues are undoubtedly more relevant in developing countries, research on healthinequalities and, more specifically, on inequality of opportunity in the health dimension, remains scarce in this context. This paper explores the degree of inequality of opportunity in health in a developing country, using the 2007 Indonesian Family Life Survey, a large-scale survey with extremely rich information about individualhealth outcomes (biomarkers and self-reports) and individual circumstances.We compute a continuous synthetic index of global health status based on a comprehensive set of healthindicators and subsequently implement non-parametric and parametric methods in order to quantify the level ofinequality of opportunity in the health dimension. Our results show large inequality of opportunities in health inIndonesia, compared to European countries. Concerning transmission mechanisms, parental (particularly maternal) vital status appears as the main channel. Compared to what has been observed in more developed countries, the effect of parental education on health is relatively smaller, and mainly indirect (passing through descendants’ socioeconomic, marital and migration statuses), while the existence of long-term differences in health related to religion, language spoken and particularly province of location suggest a relatively higher relevance of community belonging variables for health equity in the context of a developing country asIndonesia.
    Abstract: Les pays en développement sont particulièrement concernés par la question des inégalités de santé et notamment celle de l’inégalité des chances. Néanmoins, très peu de travaux sont proposés dans le cadre des économies endéveloppement. Cet article étudie l’ampleur des inégalités des chances en matière de santé en Indonésie à partir de données recueillies par l’enquête IFLS (Indonesian Family Life Survey) de 2007 qui propose une information individuelle détaillée sur l’état de santé (bio-marqueurs et auto-évaluation) mais aussi sur l’environnement socioéconomique.Un indicateur synthétique continu de l’état de santé global calculé à partir d’un ensemble complet d’informations sur la santé est dans un premier temps proposé. Des méthodes paramétriques et non paramétriques sont ensuitemobilisées pour mesurer le niveau de l’inégalité des chances dans le domaine de la santé. Les résultats mettenten évidence une importante inégalité des chances relative à l’état de santé en Indonésie par rapport au niveau d’inégalité observée dans les pays européens. Le principal vecteur de transmission de l’inégalité est le statut de santé des parents (statut vital) et en particulier celui de la mère. L’impact du niveau d’éducation des parents estindirect (agissant sur l’environnement socio-économique, le statut marital et la migration des descendants) et est beaucoup plus faible que celui généralement observé dans des économies plus développées. Les disparités à long terme de l’état de santé liées à la religion, à la langue pratiquée et plus encore à la région d’habitation suggèrentque les variables d’appartenance communautaire sont prépondérantes pour analyser la question de l’équité en santé dans un pays en développement comme l’Indonésie.
    Keywords: health,Indonesia,Equality of opportunity,continuous health index,stochastic dominance,santé,indicateur continu de santé,dominance stochastique,Indonésie,Egalité des chances
    Date: 2017–04–13
  6. By: Vu, Tien Manh; Yamada, Hiroyuki
    Abstract: We examine the transition of state-owned enterprises (SOEs) in Vietnam from a wage perspective by decomposing the difference in wage distributions between SOE employees and non-SOE employees during the period 2002–2014. In 2002, SOE employees enjoyed higher pay than non-SOE employees owing to characteristics difference and any factors other than either the price of skills or the characteristics difference, so-called residuals difference. University graduates were the main contributor to the endowments difference. However, we found that SOE pay schemes converged with those of non-SOEs by 2014, in terms of both the price of skills and residuals.
    Keywords: Wage, wage decomposition, wage distribution, state-owned enterprises, transition, Vietnam
    JEL: J30 J45 O15 P31
    Date: 2017–04–26
  7. By: Dang, Thang
    Abstract: This is the first paper identifying the causal effect of schooling on non-wage compensation using data from Vietnam. The paper takes an advantage of the establishment of the compulsory primary schooling reform that was introduced in Vietnam in 1991 to instrument for exogenous variations in years of schooling to surmount the endogeneity problem as a primary threat to idenfication facing the causal effect estimation. The paper finds that education is positively associated with non-wage benefits. In particular, the baseline 2SLS estimates indicates that one additional year of schooling is causally linked to a 6 percentage point increase in the likelihood of receiving monetary payments for public holidays, a 4.6 percentage point increase in the likelihood of receiving monetary employee benefits, a 7.3 percentage point increase in the likelihood of having annual paid leave and a 6.8 percentage point increase in the likelihood of having firm-provided social insurance. The baseline estimates are strongly robust to the estimates from some robustness checks. The paper also inspects that the causal associations between schooling and formal employment, skilled occupation and employee-friendly firm are three potential mechanisms through which schooling causally affects non-wage compensation.
    Keywords: Returns to schooling; Non-wage compensation; Developing countries
    JEL: I26 J24 J32 J33
    Date: 2017–05–19
  8. By: David Lander (Pennsylvania State University); David Gunawan (University of New South Wales); William Griffiths (Department of Economics, University of Melbourne); Duangkamon Chotikapanich (Monash University)
    Abstract: Because of their applicability for ordering distributions within general classes of utility and social welfare functions, sampling theory tests for stochastic and Lorenz dominance have attracted considerable attention in the literature. We contribute to this literature by proposing a Bayesian approach for assessing Lorenz and stochastic dominance. For two income distributions, say X and Y, estimated via Markov chain Monte Carlo (MCMC), we compute posterior probabilities for (i) X dominates Y, (ii) Y dominates X, and (iii) neither Y nor X is dominant by counting the proportions of MCMC draws that satisfy the constraints implied by each of the alternatives. We apply the proposed approach to samples of Indonesian income distributions for 1999, 2002, 2005 and 2008. To ensure flexible modelling of the distributions, mixtures of gamma densities are fitted for each of the years. We introduce probability curves that depict the probability of dominance at each population proportion and which convey valuable information about dominance probabilities for restricted population proportions relevant when studying poverty orderings. The dominance probabilities are compared with p-values from some sampling theory tests; the probability curves are used to gain insights into seemingly contradictory outcomes
    Keywords: Dominance probabilities, poverty comparisons, MCMC, gamma mixture.
    JEL: C11 C12 D31 I32
    Date: 2017–03
  9. By: 黃登興 (Institute of Economics, Academia Sinica, Taipei, Taiwan); 黃幼宜 (National Taiwan Ocean University Institute of Applied Economics); 蔡青龍 (Tamkang University Department of Diplomacy and International Relations)
    Abstract: It is well known, that ASEAN Economic Community will be created by the end of 2015. By that AEASN as a whole will become a huge market of 615 million populations. However, population size is not equivalent to market size, simply for its cross border cost in many aspects, like logistic difference, cultura land institutional heterogeneities. This project aims at exporting the empirical relationship between common market (CM) and home market effect, the effect of CM on the pattern of hub-spoke trade, the theoretical relationship between CM and the likely change on the position of vertical production specialization for the CM. In the first year, we will compute and investigate the trend of HM (hubness measure) index for the East Asian region countries, not only by total trade but also by industry
    Keywords: Regional Integration, East Asian bicycle, Hubness Measure, Spokeness Measure, 經濟整合, 中日雙軸心, 軸心指數, 輻緣指數
    Date: 2017–05
  10. By: Martin Schröder
    Abstract: Despite foreign direct investment occurring in the 1990s, automobile production in Viet Nam has not progressed beyond assembly. Due to forthcoming trade liberalisation in ASEAN, these assembly operations are endangered from closure as car-makers consider shifting to imports from more developed automobile manufacturing countries in the region. This paper analyses the current state of the automotive industry in Viet Nam and seeks to formulate policy recommendations based on the findings.
    Keywords: automotive industry, industrial development, Vietnamese industry
    JEL: L62
    Date: 2017–05
  11. By: Leonardo Bursztyn; Bruno Ferman; Stefano Fiorin; Martin Kanz; Gautam Rao
    Abstract: This paper provides novel field-experimental evidence on status goods. We work with an Indonesian bank that markets platinum credit cards to high-income customers. In a first experiment, we show that demand for the platinum card greatly exceeds demand for a nondescript control product with identical benefits, suggesting demand for the pure status aspect of the card. Transaction data reveal that platinum cards are more likely to be used in social contexts, implying social image motivations. Combining price variation with information on the use of the card sheds light on the magnitude of the demand for social status. In a second experiment, we provide evidence of positional externalities from the consumption of these status goods. The final experiment shows that increasing self-esteem causally reduces demand for status goods. We infer that part of the demand for status is psychological in nature, and that social image is a substitute for self-image.
    JEL: C93 D03 D12 O12
    Date: 2017–05
  12. By: Alfaro, Laura; Asis, Gonzalo; Chari, Anusha; Panizza, Ugo
    Abstract: This paper documents a set of stylized facts about leverage and financial fragility in the nonfinancial corporate sector in emerging markets since the Global Financial Crisis (GFC). Corporate debt vulnerability indicators prior to the Asian Financial Crisis (AFC) attributed to corporate financial roots provide a benchmark for comparison. The firm-level data suggest that emerging markets post-GFC have lower leverage ratios than the five Asian crisis countries (Asian Five) in the run-up to the AFC. However, a broader set of emerging market countries show weaker liquidity, solvency, and profitability indicators. More countries are also in the Altman Z-score's “grey zone†, that is, at risk for corporate distress. Regression estimates confirm that leading up to the AFC and in the aftermath of the GFC, firms with higher leverage have Zscores that are closer to the financial distress range. The data also corroborate two macro-related hypotheses: first, that leverage interacted with currency depreciation had a statistically significant adverse impact on Z-scores in pre-AFC; and second, that in countries with higher GDP growth leverage is correlated with less corporate financial fragility. Consistent with Gabaix (2011) the paper finds a granularity effect in that large firms are systemically important— idiosyncratic shocks to large firms significantly correlate with GDP growth in our emerging markets sample. Also, the more-levered large firms are more vulnerable to exchange rate shocks than smaller firms with comparable levels of leverage. While this result holds for the average country in our sample, there is substantial cross-country heterogeneity.
    Keywords: Corporate Debt; emerging markets; financial fragility; Firm-Level Data; Large Firms
    JEL: F34 G01 G15 G32
    Date: 2017–05
  13. By: Olle Östensson; Anton Löf
    Abstract: The paper discusses the practical possibilities of achieving increased downstream processing and the policies that are commonly used for this purpose. It reviews the reasons why forward vertical integration is not always an optimal choice for extractive industry companies. It finds little support for the argument that differences in market power dictate the geography of downstream processing. Tariffs on processed products may also play only a limited role. The degree of vertical integration varies and appears to be mainly driven by production economics. Market determined processing margins fluctuate, which raises the risks of investing in downstream processing capacity. Policies for downstream processing are discussed based on experiences in four countries: India, Indonesia, Zambia, and Tanzania. In most of these cases, a very limited amount of analysis appears to have been undertaken to design the policies. Results so far seem to indicate that a number of unintended consequences dominate the outcomes.
    Date: 2017
  14. By: Rabbi, Muhammad Ahsan
    Abstract: There is a misconception about CPEC that this mega project is only going to benefit China and Pakistan. However, this corridor is going to restructure and transform not only South and Central Asia, but also Middle East and Europe. Unlike EU, this project is planned to link different regions for economic integration and trade. This study is to analyse the importance of CPEC for its participants and its role in enhancing the economic integration and trade openness among Asian, European and African states. Not only this, challenges and opportunities associated with this project are also been discussed in this paper.
    Keywords: CPEC, Economic Integration, Trade Openness
    JEL: F60 F69 Z00
    Date: 2017–05–15
  15. By: Catalina Amuedo-Dorantes (San Diego State University); Delia Furtado (University of Connecticut)
    Abstract: The yearly cap on H-1B visas became binding for the first time in 2004, making it harder for college-educated foreigners to work in the United States. However, academic institutions are exempt from the cap and citizens of five countries (Canada, Mexico, Chile, Singapore, and Australia) have access to alternative work visas. We exploit those exemptions to gauge how immigrant career choices are affected by the binding visa cap. Among other impacts, the binding cap raises international students’ likelihood of employment in academia, even outside of their field of study, a result consistent with the notion of “settling for academia.â€
    Keywords: H-1B visas, high-skilled immigration, academic labor market, United States
    JEL: F22 J61 J68
    Date: 2017–05

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