nep-sea New Economics Papers
on South East Asia
Issue of 2018‒03‒12
eighteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Assessing the Spatial Concentration of Indonesia's Manufacturing Sector Evidence from Three Decades By Alexander D. Rothenberg; Samuel Bazzi; Shanthi Nataraj; Amalavoyal V. Chari
  2. Are ecosystem services complementary or competitive? An econometric analysis of cost functions from private forests in Vietnam By Cosmas Kombat Lambini; Trung Thanh Nguyen; Jens Abildtrup; Van Dien Pham; John Tenhunen; Serge Garcia
  3. When Regional Policies Fail An Evaluation of Indonesia's Integrated Economic Development Zones By Alexander D. Rothenberg; Samuel Bazzi; Shanthi Nataraj; Amalavoyal V. Chari
  4. Investor Sentiment Connectedness: Evidence from Linear and Nonlinear Causality Approaches By Aviral Kumar Tiwari; Deven Bathia; Elie Bouri; Rangan Gupta
  5. Identifying Productivity Spillovers Using the Structure of Production Networks By Samuel Bazzi; Amalavoyal V. Chari; Shanthi Nataraj; Alexander D. Rothenberg
  6. Family Planning and Fertility Behavior: Evidence from Twentieth Century Malaysia By Kimberly Singer Babiarz; Jiwon Lee; Grant Miller; Tey Nai Peng; Christine Valente
  7. The Impact of Natural Disasters on Firm Growth in Vietnam: : Interaction with Financial Constraints By F. Zhou; W.J.W. Botzen
  8. Structural change, fundamentals, and growth: A framework and case studies: Synopsis By McMillan, Margaret S.; Rodrik, Dani; Sepúlveda, Claudia
  9. Misallocation, Markups, and Technology By Bayer, Christian; Meier, Matthias
  10. Family Planning and Women’s Economic Empowerment: Incentive Effects and Direct Effects among Malaysian Women By Kimberly Singer Babiarz; Jiwon Lee; Grant Miller; Tey Nai Peng; Christine Valente
  12. How to change the game of security cooperation: The case of the ASEAN-China strategic partnership By Misalucha-Willoughby, Charmaine
  13. Aggregate Consequences of Credit Subsidy Policies: Firm Dynamics and Misallocation By Hwan Jo; Tatsuro Senga
  14. Indo-Japanese Relations on an Upward Trend By Eva Ozsvald
  15. Ctrip: China’s Online Travel Platform - Local Giant or Global Competitor? By Shao, Tianyi; Kenney, Martin
  16. People’s Republic of China-Hong Kong Special Administrative Region; Selected Issues By International Monetary Fund
  17. People's Republic of China-Hong Kong Special Administrative Region; 2017 Article IV Consultation-Press Release; Staff Report; Statement by the Executive Director for People’s Republic of China––Hong Kong Special Administrative Region By International Monetary Fund
  18. Major Government Customers and Loan Contract Terms By Cohen, Daniel A.; Li, Bin; Li, Ningzhong; Lou, Yun

  1. By: Alexander D. Rothenberg; Samuel Bazzi; Shanthi Nataraj; Amalavoyal V. Chari
    Abstract: Beyond the role of economic forces, many theories of economic geography emphasize the way politics can shape the spacial configuration of economic activity. We investigate the impact of changes in political regimes on industrial concentration using 30 years of data on Indonesian manufacturers. These data span both the reign of Suharto, one of the strongest central governments in Southeast Asia, and its collapse and the subsequent decentralization of power. Using the canonical measure of Ellison and Glaeser, we show that in the mid 1980s, Indonesia's firms exhibited a similar degree of agglomeration as seen in the United States. Spatial concentration then declined until the 1998 Asian Financial Crisis, and has since begun to rise during the decentralization period. We also measure concentration using the continuous measure developed by Duranton and Overman (2005 ), and find that the agglomeration exhibited by Indonesian firms is also broadly similar to that documented by Duranton and Overman (2005 ) for the United Kingdom, although localization drops off more gradually in Indonesia than in the United Kingdom. Using this continuous measure of agglomeration, we identify 32 manufacturing clusters in Indonesia, and investigate the correlates of concentration. We find that the most robust drivers of agglomeration have been natural resources and supply chain linkages, especially with respect to explaining long-term changes in spatial concentration.
    Date: 2017–01
  2. By: Cosmas Kombat Lambini (Bayreuth Center for Ecology and Environmental Research, University of Bayreuth, 95440 Bayreuth, Germany; Bayreuth Graduate School of Mathematical and Natural Sciences (BayNAT), University of Bayreuth 95440, Bayreuth, Germany); Trung Thanh Nguyen (Institute for Environmental Economics and World Trade, Leibniz University of Hannover, Königsworther Platz 1, 30167 Hannover, Germany); Jens Abildtrup (UMR INRA – AgroParisTech, Laboratoire d’Économie Forestière, 54042 Nancy Cedex, France); Van Dien Pham (Department of Silvilculture, Forestry University, Hanoi, Vietnam); John Tenhunen (Bayreuth Center for Ecology and Environmental Research, University of Bayreuth, 95440 Bayreuth, Germany); Serge Garcia (UMR INRA – AgroParisTech, Laboratoire d’Économie Forestière, 54042 Nancy Cedex, France)
    Abstract: Forest ecosystem services (FES) provisioning and management in Vietnam is highly rated in the Vietnamese’s environmental agenda. The main rationale of private forest management is to maximise profit from timber and non-timber forest products (NTFPs) production. From a social point of view there is an under-supply of positive forest externalities (or non-marketed ecosystem services). The paper contributes to the ecosystem services (ES) literature by assessing the production cost structure, i.e., the cost of marketed production and provision of carbon and biodiversity, based on a survey of private forest owners in the Hoa Binh Province. The econometric analysis is carried out applying a dual cost function approach to analyse the trade-off between forestry costs and ecological performance. This is, to our knowledge, the first time such an approach is applied to estimate the production relationship between marketed outputs and non-marketed ES in the forest sector. This approach appears to be appropriate for handling the multiple joint outputs of production in forest. It allows us to estimate marginal costs and other cost measures such as cost complementarities in production of multiple ES. Our results indicate that there is complementarity in the provision of timber and carbon sequestration and therefore, policies enhancing carbon sequestration in private forest in Vietnam can be implemented without additional costs for the forest owner. We also find that keeping deadwood had no significant cost and was complementary with NTFP, but could increase the marginal cost of producing timber. This means that biodiversity can be enhanced without additional costs on the condition of limited quantity of deadwood.
    Keywords: private forest owners, forest ecosystem services, Vietnam, cost function, cost complementarity
    JEL: C31 Q23 Q24
    Date: 2016–08
  3. By: Alexander D. Rothenberg; Samuel Bazzi; Shanthi Nataraj; Amalavoyal V. Chari
    Abstract: Throughout the developing world, many countries have created special economic zones to attract investment and spur industrial growth. In some cases, these zones are designed to promote development in poorer regions with limited market access and lower quality infrastructure, an example of a "big push" development strategy. In this paper, we study the effects of Indonesia's Integrated Economic Development Zone (KAPET) program. This program provided substantial tax-breaks for firms that locate in certain districts in the Outer Islands of Indonesia, a country with large regional differences in per-capita income and a history of policies to promote inclusive growth. We find that along many dimensions, KAPET districts experienced no better development outcomes, and in some cases fared even worse, than their non-treated counterparts. If anything, the strongest finding is that firms in KAPET districts paid lower taxes, but these tax reductions neither encouraged greater firm entry, increased migration, nor raised local measures of output or welfare. Overall, the KAPET program does not appear to have achieved the intended outcome of promoting growth in lagging regions. While there are many possible reasons that the KAPET program failed, our findings suggest caution in spending scarce resources to subsidize development in lagging regions.
    JEL: R12 R32 O14
    Date: 2017–02
  4. By: Aviral Kumar Tiwari (Montpellier Business School, Montpellier, France); Deven Bathia (Queen Mary University of London, School of Business and Management, London, UK); Elie Bouri (USEK Business School, Holy Spirit University of Kaslik, Lebanon); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa)
    Abstract: This paper provides a novel perspective in determining the causality of sentiment across US, Latin America, Eurozone, Japan and Asia (excluding Japan), based on monthly data covering the period of January 2003 to November 2017. Using a survey-based sentiment index of ‘sentix’, our results tend to suggest strong evidence of nonlinearity and structural breaks making the results from linear causality models unreliable. Using a kernel-based multivariate nonlinear causality test, we find that causality runs from Eurozone to US, Asia, and Japan, with Japan also causing the Eurozone sentiment, and Latin-America causing Japanese sentiment. Interestingly, when we applied rolling estimations to detect time-varying causality for the cases of Eurozone and US, Eurozone and Asia, Eurozone and Japan, and Latin-America and Japan, we found evidence of bi-directional spillovers during certain months of the recent global financial crisis, and thereafter. Overall, our findings indicate that the sentiments of Japan, Asia, and US are related quite strongly with that of the Eurozone, as is Japan and Latin America.
    Keywords: Sentiment Spillovers, Linear and Nonlinear Causality, US, Latin America, Eurozone, Asia
    JEL: C32
    Date: 2018–02
  5. By: Samuel Bazzi; Amalavoyal V. Chari; Shanthi Nataraj; Alexander D. Rothenberg
    Abstract: Despite the importance of agglomeration externalities in theoretical work, evidence for their nature, scale, and scope remains elusive, particularly in developing countries. Identification of productivity spillovers between firms is a challenging task, and estimation typically requires, at a minimum, panel data, which are often not available in developing country contexts. In this paper, we develop a novel identification strategy that uses information on the network structure of producer relationships to provide estimates of the size of productivity spillovers. Our strategy builds on that proposed by Bramoulle et al. (2009) for estimating peer effects, and is one of the first applications of this idea to the estimation of productivity spillovers. We improve upon the network structure identification strategy by using panel data and validate it with exchange-rate induced trade shocks that provide additional identifying variation. We apply this strategy to a long panel dataset of manufacturers in Indonesia to provide new estimates of the scale and size of productivity spillovers. Our results suggest positive productivity spillovers between manufacturers in Indonesia, but estimates of TFP spillovers are considerably smaller than similar estimates based on firm-level data from the U.S. and Europe, and they are only observed in a few industries.
    Date: 2017–03
  6. By: Kimberly Singer Babiarz (Stanford University); Jiwon Lee (Pomona College); Grant Miller (Stanford University; NBER); Tey Nai Peng (University of Malaysia); Christine Valente (University of Bristol)
    Abstract: There is longstanding debate about the contribution of family planning programs to fertility decline. Studying the staggered introduction of family planning across Malaysia during the 1960s and 1970s, we find modest responses in fertility behavior. Higher (but not lower) parity birth hazards declined by one-quarter—but imply only a 5 percent decline in the overall annual probability of birth. Age at marriage rose by 0.48 years, but birth spacing conditional on this did not otherwise change. Overall, Malaysia’s total fertility rate declined by about one quarter birth under family planning, explaining only about 10 percent of the national fertility decline between 1960 and 1988. Our findings are consistent with growing evidence that global fertility decline is predominantly due to underlying changes in the demand for children.
    JEL: J12 J13
    Date: 2017–12–07
  7. By: F. Zhou; W.J.W. Botzen
    Abstract: The theory on the disaster impacts on firm growth is ambiguous and the empirical evidence on this topic is scarce, which hampers the design of disaster risk reduction and climate change adaptation policies. This paper estimates growth models of the impacts of natural disasters on labour, capital, and value-added growth of firms in the short run, and identifies the role of financial constraints in shaping disaster outcomes. The analysis uses a comprehensive enterprise census data (2000-2009) and also two different types of disaster measures from Vietnam: the physical intensity measures and the socioeconomic damage measures. We apply the Blundell-Bond generalized method of moments (GMM) to estimate firm level disaster impacts, and find robust evidence that natural disasters on average increase firm growth significantly. We also find stronger positive impacts in labour and output growth for more constrained firms. We argue that this occurs because financially more constrained firms substitute labour for capital during the reconstruction phase after a disaster.
    Keywords: Natural disaster, disaster impact, firm growth, financial constraints, disaster measure
    Date: 2017
  8. By: McMillan, Margaret S.; Rodrik, Dani; Sepúlveda, Claudia
    Abstract: Can developing countries use industrialization, as the East Asian economies did, to try to catch up with the high-income countries? Structural Change, Fundamentals, and Growth says the answer is likely to be “no.†Rather, they will need to chart a new path to economic convergence that relies less on moving from low-productivity agriculture to higher-productivity manufacturing, and more on investing in health, education, and institutions—although the process will take longer this way.
    Keywords: structural change; economic development; economic growth; trade liberalization; productivity; trade policies; education; health; institutions,
    Date: 2017
  9. By: Bayer, Christian; Meier, Matthias
    Abstract: Hsieh and Klenow (2009) quantifies aggregate TFP losses from misallocation through factor productivity dispersions and finds misallocation important in explaining international TFP differences. Using micro data from Chile, Colombia, Indonesia, and Germany, we document that dispersion in factor productivities is driven by dispersion in technology and markup. Relative to Germany, misallocation losses for the developing economies are explained to 1/3 by larger technology and to 2/3 by larger markup dispersion. Finally, we show that increased competition reduces technology dispersions but can cause larger markup dispersions as does more innovation. Hence, looking at markup dispersions alone might be misleading.
    Keywords: Competition; Development; Misallocation; productivity
    JEL: D24 E23 O47
    Date: 2018–02
  10. By: Kimberly Singer Babiarz (Stanford University); Jiwon Lee (Pomona College); Grant Miller (Stanford University; NBER); Tey Nai Peng (University of Malaysia); Christine Valente (University of Bristol)
    Abstract: Although family planning programs can improve women’s welfare directly through changes in realized fertility, they may also have important incentive effects by increasing parents’ investments in girls not yet fertile. Exploiting the staggered implementation of family planning programs in Malaysia during the 1960s and 1970s among girls of varying ages, we study these potential incentive effects, finding that family planning may have raised raise girls’ educational attainment substantially. We also find that these early investments are linked to gains in women’s paid labor at prime working ages and to greater support for women’s elderly parents (a marker for women’s bargaining power within the household). Notably, these incentive effects may be larger than the direct effects of family planning alone.
    JEL: J13 J16
    Date: 2017–12–07
  11. By: Abdullah Gulcu (Department of Economics, Middle East Technical University, Ankara, Turkey); Dilem Yildirim (Department of Economics, Middle East Technical University, Ankara, Turkey)
    Abstract: This study aims to explore the empirical validity of the real interest rate parity (RIP) hypothesis for East Asian countries using Japan as the base country. To this end, we employ the recently proposed unit root tests of Christopoulos and Leon-Ledesma (2010) that account for both multiple smooth structural breaks of unknown form and nonlinear mean reversion in the series. Our empirical results uncover overwhelming evidences in favor of the RIP hypothesis for the whole countries in our sample. More specifically, through a Fourier approximation, it is observed that all real interest rate differentials display a mean reverting behavior around an infrequently smooth-breaking mean, with the breaks being in accordance with the financial reforms and economic crises witnessed by the countries. Moreover, the degree of mean reversion appears to vary nonlinearly with the size of real interest rate appreciations and depreciations.
    Keywords: Real Interest Rate Parity, Financial Integration, Nonlinearity, Smooth Structural Breaks, East Asian Countries
    JEL: C22 E40 F36 F40 G01
    Date: 2018–02
  12. By: Misalucha-Willoughby, Charmaine
    Abstract: The challenges of a polycentric world necessitate new ways of addressing global problems. Of late, strategic partnerships have become prominent features in the foreign profiles of international actors. They can be seen as a practice of cooperation, and can be further broken down to patterned actions, such as diplomacy and summitry. These practices feature prominently in the ASEAN-China strategic partnership for two reasons. First, diplomacy has proven to be pivotal in both the securitization and the desecuritization of the South China Sea maritime dispute. Second, summitry is the foundation of the ASEAN-China Dialogue Relations, which was formally established in 1996, and on which the strategic partnership is built. Looking at the ASEAN-China strategic partnership from the perspective of practice theory can then identify the constitutive effects of practices on regional cooperation. This effectively moves the discussion about strategic partnerships from what they are to how they operate in international relations. The practices of diplomacy and summitry in ASEAN-China relations can then be argued as the key forces behind regional cooperation.
    Keywords: ASEAN,China,Strategic partnership,Philippines,South China Sea,Security cooperation,Practice theory
    Date: 2018
  13. By: Hwan Jo (National University of Singapore); Tatsuro Senga (Queen Mary University of London)
    Abstract: Government policies that attempt to alleviate credit constraints faced by small and young firms are widely adopted across countries. We study the aggregate impact of such targeted credit subsidies in a heterogeneous firm model with collateral constraints and endogenous entry and exit. A defining feature of our model is a non-Gaussian process of firm-level productivity, which allows us to capture the skewed firm size distribution seen in the Business Dynamics Statistics (BDS). We compare the welfare and aggregate productivity implications of our non-Gaussian process to those of a standard AR(1) process. While credit subsidies resolve misallocation of resources and enhance aggregate productivity, increased factor prices, in equilibrium, reduce the number of firms in production, which in turn depresses aggregate productivity. We show that the latter indirect general equilibrium effects dominate the former direct productivity gains in a model with the standard AR(1) process, as compared to our non-Gaussian process, under which both welfare and aggregate productivity increase by subsidy policies.
    Keywords: misallocation, collateral constraints, firm dynamics, firm size
    JEL: E22 G32 O16
    Date: 2017–11–16
  14. By: Eva Ozsvald (Centre for Economic and Regional Studies of the Hungarian Academy of Sciences, Institute of Economics)
    Abstract: The outstandingly positive relationship between India and Japan is a product of the new millennium and a bright spot in the Asia-Pacific, the geopolitics of which region has become increasingly uncertain. A primary reason behind the regional tensions is China’s growing economic and military power combined with her aspiration for dominance over the Indo-Pacific arena. India and Japan both have stakes in maintaining regional stability and creating a truly multi-polar Asia. The booming relationship between the two is thus fuelled by the converging strategic interest to contain China’s assertive behaviour. The security and diplomatic aspects of the Indo-Japanese ties, however, are only one side of the coin. The other is the economic relations which starting from a very low base are now on an upward trajectory as well. This paper analyses several fields of economic interactions. Official development aid (ODA) provided by Japan has been the most successful area of cooperation and was beneficial not only for India’s infrastructure development but also for Japanese companies seeking new opportunities. Foreign direct investments from Japan to India has been growing also steadily but they keep lagging behind those to China and Southeast Asian countries. There are still numerous issues that hold back the dynamics of Indo-Japanese economic relations. Once the ongoing reforms succeed in diminishing the hindering factors, the potential becomes huge given the complementary nature of the two economies. In the medium run, however, the economic relations with China remain more important for both India and Japan.
    Keywords: India, Japan, ODA, FDI
    JEL: F35 F50 O53
    Date: 2018–02
  15. By: Shao, Tianyi; Kenney, Martin
    Abstract: In a large number of sectors, Chinese internet platform firms have grown to enormous size leveraging a rapidly growing, largely protected domestic market This paper describes the formation and growth of the largest Chinese travel and tourism platform, Ctrip within the context to the changing Chinese economy. In 2018, Ctrip was one of the largest travel platforms in the world and, though still significantly smaller than the US travel and tourism platforms that dominate most of the rest to the world, it was growing far faster than them. Ctrip’s remarkable success is explained within the context to the rising tide of Chinese tourism. The paper explores Ctrip’s recent globalization strategies suggesting that it intends to expand beyond just serving the Chinese market or Chinese tourists in global markets. At this point, the globalization strategy appears to have two prongs: The first prong has been using its enormous cash flow to acquire or co-invest in local firms that dominate other developing country markets that are expanding rapidly. The two cases in point are its equity investment in the Indian travel giant, MakeMyTrip, and investments in Southeast Asia. The second prong is investing or acquiring firms/websites in developed nation markets that can either service the enormous flow of Chinese tourists it controls or provide services to Western travelers. For these investments, Ctrip can provide infrastructural and capital support to allow these operations to expand more quickly. It is uncertain how successful Ctrip’s initiatives in international markets will be. However, given that Chinese tourism is likely to continue its rapid growth and that Ctrip monopolizes this market, it has significant financial resources, enormous leverage in directing this flow of tourists for strategic advantage, and a rapidly developing capability in analyzing the enormous inflow of data that it receives. For the reasons we describe, Ctrip is likely to be an increasingly formidable competitor to the US global travel and tourism platform giants, Expedia, Priceline, and TripAdvisor.
    Date: 2018–03–05
  16. By: International Monetary Fund
    Abstract: People’s Republic of China-Hong Kong Special Administrative Region-Selected Issues
    Keywords: Asia and Pacific;Hong Kong Special Administrative Region of China;
    Date: 2018–01–22
  17. By: International Monetary Fund
    Abstract: Growth bottomed out and economic activity has gathered momentum since the second half of 2016 and over the course of 2017, in line with the global economic recovery. The macroeconomic outlook has improved and a robust recovery is expected to continue. Nevertheless, the outlook faces multiple challenges, both external and domestic, including from tighter global financial conditions, possible bumps in Mainland China’s ongoing transition, a retreat from cross-border integration, a potential adjustment following the current housing boom, as well as long-term challenges from rapid population aging.
    Keywords: Hong Kong Special Administrative Region of China;Asia and Pacific;
    Date: 2018–01–22
  18. By: Cohen, Daniel A. (University of Texas at Dallas - Naveen Jindal School of Management); Li, Bin (University of Texas at Dallas - Naveen Jindal School of Management); Li, Ningzhong (University of Texas at Dallas); Lou, Yun (Singapore Management University)
    Abstract: This study examines how a firm’s business relationship with the U.S. government, in particular, sales to the government, impacts its loan contract terms and how the effect is different from that of major corporate customers. We find that firms with major government customers have a lower number of covenants and are less likely to have performance pricing provisions in their loan contracts than other firms, whereas major corporate customers do not have such impacts. We do not find evidence that major government customers affect the supplier firm’s loan spread, security, or maturity. We conjecture that lenders benefit from the strict monitoring activities of the government customer and reduce the use of covenants and performance pricing in loan contracts when the borrowing firm has a government customer.
    Keywords: Government Customers; Loan Contract Terms
    JEL: G32 G38
    Date: 2016–11–13

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