nep-sea New Economics Papers
on South East Asia
Issue of 2018‒10‒01
28 papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Transboundary Pollution in Southeast Asia: Welfare and Avoidance Costs in Singapore from the Forest Burning in Indonesia By Tamara L. Sheldon; Chandini Sankaran
  2. Duration of Export Relationships of Philippine MSMEs By Bautista, Mark Edison; Manzano, George
  3. The Woman Contribution on the Welfare: A Case Study on Relocated Sea Nomads By Hindina Maulida
  4. Detecting exchange rate contagion in Asian exchange rate markets using asymmetric DDC-GARCH and R-vine copulas By Gomez-Gonzalez, Jose; Rojas-Espinosa, Wilmer
  5. Production Efficiency Analysis between Transplanting and Direct Seeded Rice Producers in Punjab, Pakistan By Fatima, Hina; Shaheen, Sania; Almas, Lal; Vestal, Mallory; Haroon, Sehrish
  7. Contribution to income inequality by income source: A comparison across ethnic groups in Vietnam By Nguyen, Hien; Doan, Tinh; Quang Tran, tuyen
  8. Consumer behavior and customer loyalty program: Case of Tesco in Thailand By Paitoon Chetthamrongchai
  9. Drivers of Heterogeneity in Yield Gains from GM Maize in the Philippines: Evidence from Panel Data By Jones, Michael S.; Rejesus, Roderick M.; Brown, Zachary S.; Yorobe, Jose M.
  10. Labor Savings and Time Allocation Shifts from the Adoption of Pesticidal GM Crops in the Philippines By Connor, Lawson; Rejesus, Roderick M.
  11. Resilience to Shocks during Adolescence and Later Human Capital Outcomes: Evidence from Natural Disasters in the Philippines By Herrera Almanza, Catalina; Cas, Ava
  12. Is there a rainbow after the rain? How do agricultural shocks affect non-farm enterprises? Evidence from Thailand By Grabrucker, Katharina; Grimm, Michael
  13. Forestland and household welfares in North Central Provinces, Vietnam By Quang Tran, Tuyen; Viet Nguyen, Thanh
  14. Agriculture Sector Analysis on Intended Nationally Determined Contributions in Developing Countries: A Case Study of Vietnam By Zhao, Guannan; McCarl, Bruce A.; Laderach, Peter; Grosjean, Godefroy
  15. Evaluating the impact of timely disaster response in the Philippines By Harou, Aurelie P.; Vasilaky, Katya; Osgood, Daniel E.
  17. The Road to Mandalay: Global Capitalism and the Translational Identity of Burmese Chinese in Midi Z?s Films By Han-sheng Wang
  18. Perceptions and mitigation of risk of waterborne disease in Vietnam among small scale integrated livestock farmers. By Hall, D.
  19. Innovation, Firm Size Distribution, and Gains from Trade By Chen, Yi-Fan; Hsu, Wen-Tai; Peng, Shin-Kun
  20. Mitigation of water related zoonotic diseases on small-scale integrated farms in Vietnam By Hall, David C.; Le, Quynh B.
  21. R4D Policy Brief 2015/2a: Policy recommendations for increasing the quality and quantity of employment in Vietnam By Francois, Joseph; Oberdabernig, Doris
  22. Social Norms and Fertility By Sunha Myong; JungJae Park; Junjian Yi
  23. Les relations commerciales agroalimentaires de la Russie avec l’Union européenne, l’embargo russe et les productions animales By Chatellier, Vincent; Pouch, Thierry; Le Roy, Cécile; Mathieu, Quentin
  24. Trade and Immigration, 1870-2010 By David S. Jacks; John P. Tang
  25. Effect of Supply Chain Integration on the Business Performance and Competitiveness of the Philippine Small and Medium Enterprises By Borazon, Elaine, Q; Supangco, Vivien T.
  26. The impact of TVET on Cambodia’s economic development By Ly, Bora
  27. Does Foreign Direct Investment Lead to Industrial Agglomeration By Hsu, Wen-Tai; Lu, Yi; Luo, Xuan; Zhu, Lianming
  28. Investment, Current Account, and the Long Swings of Unemployment By Hian Teck Hoon; Margarita Katsimi; Gylfi Zoega

  1. By: Tamara L. Sheldon (University of South Carolina); Chandini Sankaran (Boston College)
    Abstract: Forest burning in Indonesia results in severe episodes of “seasonal haze” in neighboring Singapore. We offer the first causal analysis of the transboundary health effects of the Indonesian forest burning. Using a two-stage approach and instrumenting for air pollution with satellite fire data, we estimate the impacts of the Indonesian fires on Singaporean polyclinic attendances for acute upper respiratory tract infections and acute conjunctivitis. We also estimate the change in electricity demand in Singapore attributable to the fires, finding that demand increases as people respond to haze episodes by staying indoors. We estimate partial health and avoidance costs of US$333 million from January 2010 to June 2016. Our estimates suggest avoidance behavior is significant, accounting for over three quarters of our estimate.
    Keywords: air pollution; health; avoidance behavior; externalities; forestry
    JEL: D62 I1 Q23 Q51 Q53
    Date: 2016–12–05
  2. By: Bautista, Mark Edison; Manzano, George
    Abstract: Within the framework of the Asia-Pacific Economic Cooperation (APEC) Boracay Action Agenda and the ASEAN Strategic Action Plan developed by its members to assist micro, small, and medium enterprises (MSMEs) to reach internationalization, the study examines the survivability of Philippines MSMEs' exports to select countries. The analysis is based on the survival analysis model of Besedeš and Prusa (2006a; 2006b) and Besedeš and Prusa (2008). Using the Kaplan Meier estimator model in both the MSME exports and the total trade data in documenting the survival rate of goods and duration of Philippine exported products, the study finds that most export relationships of the Philippines are brief, contrary to conventional trade theories which suggest that most trade relationships will be long-lived. Also, MSMEs, on average, account for a more significant number of export relations than large establishments. Furthermore, among MSMEs, it is the medium-sized firms that constitute the majority of export relations over different durations.
    Keywords: Philippines, micro, small, and medium enterprises, trade, MSMEs, survival analysis, duration, export survival, Philippine export
    Date: 2018
  3. By: Hindina Maulida (UIN SULTAN SYARIF KASIM RIAU)
    Abstract: Southeast Asia is the home of Sea Nomads distinctive groups, called as Suku Laut. In Indonesia, some of the Sea Nomads already live in the relocated are but they live in poverty. To achieve the community welfare, it shall begin with the family prosperity that needs woman contributio. This paper investigates how woman participation improves the welfare of Duanu Tribe with the aim to understand how the stronger roles of women contribute to the welfare. Using case study method, the primary data were obtained from interviews with women ofDuanu Tribe, village head, Duanu tribal figures, and observations. Secondary datawere taken from UDHR documents, Indonesian government regulations, and other related research. The women of Duanu Tribe have not been able to maximally participate in improving the tribe welfare due to lack of education, low health degree, and culture that stimulates them to be unproductive and have multiple burdens when participating in the public sector. Therefore, there is in need of women's empowerment in order to realize the prosperity of the Duanu Tribe.
    Keywords: woman empowerment, welfare, sea nomads, duanu tribe, Riau
    Date: 2018–06
  4. By: Gomez-Gonzalez, Jose; Rojas-Espinosa, Wilmer
    Abstract: This study uses asymmetric DCC-GARCH models and copula functions for studying exchange rate contagion in a group of twelve Asia-Pacific countries. Using daily data between November 1991 and March 2017, shows that extreme market movements are mainly associated with the high degree of interdependence registered by countries in this region. The evidence of contagion is scarce. Asymmetries do not appear to be important. Specifically, currency co-movements are statistically identical during times of extreme market appreciation and depreciation, indicating that phenomena such as the "fear of appreciation" do not appear to be relevant in the region's foreign exchange markets.
    Keywords: Exchange rate contagion; Asian financial crisis; Copula functions; DCC-GARCH models.
    JEL: C32 C51 E42
    Date: 2018–08–21
  5. By: Fatima, Hina; Shaheen, Sania; Almas, Lal; Vestal, Mallory; Haroon, Sehrish
    Abstract: Rice is known as an Asian crop because 90% of global rice production and consumption takes place in Asia. It is the staple food for about 50% of the world population and 75% of the people living in developing countries. Pakistan is the 11th rice producer in the world and 5th largest exporter. Comparative economic efficiency of Transplanted (TRP) and Direct Seeded (DRS) rice production in Pakistan needs evaluation. This study analyzed the economic efficiency of TRP) and DRS producers in rice producing districts of Punjab. Primary data was collected from major rice producing areas of Punjab, Pakistan and Stochastic Frontier Analysis (SFA) was run in order to estimate the profit efficiency of rice producers. The results revealed that on average profit efficiency of TRP rice farmers and DRS farmers was 57% and 83%, respectively. Hence, there are opportunities to improve economic and technical efficiency as well as the rice production profitability through adopting improved farming practices, optimal use of inputs and production techniques. The results also demonstrated that socio-economic factors of rice producers also significantly influence the profit efficiency of rice producers. Therefore, the efficiency of rice producers can also be improved through education and enrichment of extension services in the rural areas.
    Keywords: Crop Production/Industries
    Date: 2018–01–24
  6. By: Rd. Siti Sofro Sidiq (Universitas Riau)
    Abstract: Akit tribe as one of indigenous community in Riau Province, Indonesia has received empowerment program for several times. It should result on better condition in all aspects of life including health condition. The health quality of Akit tribe, however, is still marginalized as shown from the environment situation, house condition, and water quality for daily activities. This paper examines the root causes of the low health quality in Akit Tribe in order to get the full pictures of its problem. The method used in this research is case study with the data collected by taking literature study, observation, and in-depth interviews. The result of the research suggested that the root causes of the failed empowerment is due to the incoherence of governmental institution, low education of Akit Tribe, environmental dependency, and the guidance from ancestor.
    Keywords: health quality, indigenous community, empowerment, Akit Tribe, Riau
    Date: 2018–06
  7. By: Nguyen, Hien; Doan, Tinh; Quang Tran, tuyen
    Abstract: This study explores the dynamics of income and income inequality in Vietnam from 2004 to 2014. Two main sub-population groups are investigated: the ethnic majority, known as the Kinh people, and the minority group, which includes 53 minor ethnicities in Vietnam. The findings show that income gap among ethnic groups has increased over the last decade. The Gini index decomposition indicates that wages and nonfarm income are the two main determinants of income inequality. Cultivation and agricultural side-line incomes were relatively evenly distributed, despite their recent smaller equalizing effect. Both sub-population groups have experienced a decreasing contribution of the agricultural sector to overall household income. The changes in income inequality in Vietnam by income sources reflect the economic structure change of the economy from the agricultural reliance to non-agricultural economic activities.
    Keywords: Income inequality, ethnicity, decomposition, Vietnam
    JEL: D6 D63 I32
    Date: 2017–12–15
  8. By: Paitoon Chetthamrongchai (Kasetsart University)
    Abstract: Loyalty programs (sometimes referred to as loyalty systems) are part of marketing communication, respectively one of the classic tools of sales promotion. Through this tool marketing can effect on customers in order to stimulate their loyalty. The basic principle of loyalty program is to motivate customers to more frequent purchases or multiple purchases whether of goods or services. The essence of this tool is to reward consumers for their behavior. The primary purpose of loyalty programs is to establish and maintain a loyal customer long term relationship (Zamazalova, 2010). If customers are involved in loyalty programs they can acquire various forms of rewards for their purchases. Various kinds of rewards (discounts, gifts or bonuses ?) are key factors on which the loyalty program is built and which is the basic of the motivation. Loyalty marketing is based on the fact that 20% of customers at the company can create up to 80% of sales. Moreover the most loyal customers are most profitable for the company (O?Brien and Jones, 1995). Loyalty programs are regarded as a tool through which you can build long term loyalty. The essence of a functioning loyalty program is to provide rewards to customers who often buy in a certain.The paper introduces the partial results of the marketing research on Tesco loyalty programs in Thailand. The aim was to identify the reasons that lead consumers to participate in loyalty programs and the benefits that are the main motivators for participation in the loyalty program.
    Keywords: Loyalty programs, marketing communication, loyal customers
    Date: 2018–06
  9. By: Jones, Michael S.; Rejesus, Roderick M.; Brown, Zachary S.; Yorobe, Jose M.
    Keywords: Productivity Analysis, Production Economics, International Development
  10. By: Connor, Lawson; Rejesus, Roderick M.
    Keywords: Production Economics, Labor and Human Capital, Productivity Analysis
  11. By: Herrera Almanza, Catalina; Cas, Ava
    Keywords: Labor and Human Capital, Consumer/Household Economics, Resource/Energy Economics and Policy
    Date: 2017–06–15
  12. By: Grabrucker, Katharina; Grimm, Michael
    Abstract: Increasing weather volatility poses a significant threat to the livelihood of rural households in developing countries. While how rainfall shocks affect agricultural households has been well documented, there is not much evidence on the indirect effects on non-agricultural households. Combining household panel data with grid-level precipitation data, we analyze how rainfall shocks affect non-farm enterprises in rural Thailand. We examine the effects of rainfall shocks on labor supply for independent, non-farm activities as well as the indirect effects of rainfall shocks on non-farm enterprises through forward linkages, backward linkages and the consumption levels of farm households. We find that farm households increase their labor participation in non-farm self-employment in response to rainfall shocks. We also observe that rainfall shocks lead to increased input costs by non-farm enterprises in the food processing industry, to higher input costs by farms, to higher sales by agriculture-related non-farm enterprises and to lower expenditure by farm households on food and other consumption items. These effects are significant for surplus rainfall shocks (i.e., more rainfall than usual) but less robust for deficit rainfall shocks (i.e., less rainfall than usual), yet both surplus and deficit rainfall shocks lower agricultural production compared to normal rainfall conditions.
    Keywords: Keywords: Rainfall shocks, Non-farm enterprises, Farm/Non-farm linkages, Thailand
    JEL: D22 J22 Q12 R11
    Date: 2018–09
  13. By: Quang Tran, Tuyen; Viet Nguyen, Thanh
    Abstract: This paper investigates the effects of forestland on household income, poverty and inequality among households in Vietnam’s poorest rural districts, the North Central Provinces, using data from the Quantitative Socio-Economic Survey for Emission Reduction-Program (ERP) Provinces Areas [QSESERPA]. Local people are extremely poor, with 54% living below the poverty line. Forest income constitutes about 17% of their total income; only wage income (37%) ranks higher. Surprisingly, those better off depend on forest income more than the poor do. Such income is comprised mainly of non-timber forest plants (77%), followed by timber products (18%). Our micro-econometric analysis indicates that gaining access to more forestland would increase household per capita income and reduce the incidence and intensity of poverty, even after controlling for all other variables in the model. In addition, we find that forest income was the second largest contributor to overall income inequality and had the largest marginal effect on it. A policy implication here is that increasing the access of the poor to forest resources and improving their efficiency in forest management could have a substantial effect on income, poverty and inequality in the study area.
    Keywords: forestland; forest income; fractional probit; Gini decomposition; shortfall
    JEL: Q1 Q15 Q2 Q24 R2
    Date: 2018–01–15
  14. By: Zhao, Guannan; McCarl, Bruce A.; Laderach, Peter; Grosjean, Godefroy
    Keywords: Resource/Energy Economics and Policy, Agricultural and Food Policy, International Development
  15. By: Harou, Aurelie P.; Vasilaky, Katya; Osgood, Daniel E.
    Keywords: Risk and Uncertainty, International Development, Land Economics/Use
  16. By: R. Yogie Prawira W. (UNIBI)
    Abstract: For several years, the haze smoke that creates on huge and wide effect in many aspects including environmental right violation, air pollution, and many victimsdue to forest fire happened annually in Riau Province Indonesia. The local society and the neighbouring countries have protested this condition but it seems that this problem is far away to be solved. This study is aimed to offer a human right-based approach as a solvent to another policy of forest fire mitigationwith the aim to bridge the gap on the forest fire mitigation effort. Thus, this research is a desktop research that examines the prospect and limits of such approach based on the environmental communication strategy perspective. Human rights based approach can be used as an effort to mitigate forest fires by maximizing the main elements of community participation through environmental communication by holding events, campaigninghastag movements in social media, and giving social sanction for companies involved in the forest burning efforts.
    Keywords: marketing, environmental communication, environmental protection, haze smoke, Riau,
    Date: 2018–06
  17. By: Han-sheng Wang (Department of Modern Languages, National Pingtung University of Science and Technology, Taiwan)
    Abstract: The concept of ?Chinese-ness? has been questioned and renounced for endorsing a hegemonic, Han-centric construction of overseas Chinese identity, overlooking the already multiple, localized experiences facing diasporic subjects nowadays. In this new light, the many distinct experiences of Chinese settlers and their descendants in Southeastern Asian countries need to be re-examined. For instance, the development of global capitalism in this region has complicated the formation of ethnic Chinese identity over the past decades. On the one hand, ethnic Chinese settling in these countries may have been pushed by the unequal social, political, and economic treatments to re-migrate to neighboring countries for better opportunities. On the other hand, the acceleration of globalization, together with the on-going process of democratization and modernization in Southeastern Asia, has made these settlements an increasingly appealing homeland to the descendants of ethnic Chinese, who have gradually assimilated into the host community. This paper thus wants to explore the creolization and translatability of young Burmese Chinese?s identities as shown in the Burma-born Taiwanese director Midi Z?s trilogy of ?returning home? entitled Return to Burma (2011), Poor Folk (2012), and Ice Poison (2014) and his 2016 The Road to Mandalay. In Midi?s series of films on leaving and returning home, this paper will trace young Burmese Chinese?s transnational migration triggered by global capitalism and address the conflict and negotiation of identity resulting from such migration.
    Keywords: Burmese Chinese, global capitalism, Midi Z, translational identity
    Date: 2018–06
  18. By: Hall, D.
    Abstract: The integrated livestock, crops, and fish (VAC) model of integrated small scale agriculture has been important to economic and ecological sustainability in Vietnam for many centuries. Recently, emerging waterborne diseases including avian influenza have jeopardized the VAC model. In order to promote mitigation of the risk of waterborne disease in the VAC system, there needs to be recognition of the significant predictors of such behaviour, particularly with respect to water sources including well and rain water. We report on research results generated from 300 farms in each of North and South Vietnam that indicate the small scale farmers who are more likely to engage in mitigation of waterborne disease are those who raise pigs, perceive themselves to be more at risk of HPAI infection from well water, report they are good livestock managers, value the advice of health care workers, and where a female household member is the decision maker for family health. These results bear importance to water and health policy formulators in rural Vietnam.
    Keywords: Environmental Economics and Policy, International Development, Land Economics/Use
    Date: 2018–07
  19. By: Chen, Yi-Fan (Academia Sinica); Hsu, Wen-Tai (School of Economics, Singapore Management University); Peng, Shin-Kun (Academia Sinica)
    Abstract: We study a trade model with monopolistic competition a la Melitz (2003) that is standard except that firm heterogeneity is endogenously determined by firms innovating to enhance their productivities. We show that the equilibrium productivity and firm-size distributions exhibit power-law tails under rather general conditions on demand and technology. In particular, the emergence of the power laws is essentially independent of the underlying primitive heterogeneity among firms. We investigate the model’s welfare implications, and conduct a quantitative analysis of welfare gains from trade. We find that, conditional on the same trade elasticity and values of the common parameters, our model yields 40% higher welfare gains from trade than a standard model with exogenously given productivity distribution.
    Keywords: Innovation; Power law; Regular variation; Welfare gains from trade; Firm heterogeneity
    JEL: F12 F13 F41
    Date: 2018–09–04
  20. By: Hall, David C.; Le, Quynh B.
    Keywords: Agribusiness, Risk and Uncertainty, International Development
    Date: 2017–06–15
  21. By: Francois, Joseph; Oberdabernig, Doris
    Abstract: For the full text of the Policy Brief, please click the link below.
    Date: 2018–09–13
  22. By: Sunha Myong (Singapore Management University); JungJae Park (National University of Singapore); Junjian Yi (The University of Chicago)
    Abstract: We first document three stylized facts about marriage and fertility in East Asian societies: They have the highest marriage rates in the world, but the lowest total fertility; they have the lowest total fertility, but almost all married women have at least one child. By contrast, almost no single women have any children. We then explain these three facts, focusing on two social norms associated with Confucianism: the unequal gender division of childcare within a household and the stigma attached to out-of-wedlock births. We incorporate the two social norms into an economic model, and structurally estimate it using data from South Korea’s censuses and household surveys. We find that, on the one hand, the social norm of unequal gender division of childcare significantly contributes to the low fertility of South Korea, and its effect varies across education: The social norm lowers fertility for highly educated women but increases it for the less educated. Pro-natal policies can increase average fertility, but they are not effective in mitigating the role of this norm as they cannot sufficiently boost fertility for highly educated women. On the other hand, the social stigma has negligible effects on marriage and fertility. Historical simulation results show that fertility would have decreased less dramatically in the absence of the first norm, especially for younger birth cohorts. Our results suggest that the tension between the persistent gender ideology and rapid socioeconomic development is the main driving force behind the unique marriage and fertility patterns of East Asian societies, and that this tension has escalated in recent decades.
    Keywords: Confucianism, social norms, fertility, demographic transition, East Asia societies
    JEL: J11 J12 J13
    Date: 2018–09
  23. By: Chatellier, Vincent; Pouch, Thierry; Le Roy, Cécile; Mathieu, Quentin
    Abstract: Russia has been for many years an important outlet for the European Union (EU) in the agri-food sector. Following the break-up of the Union of Soviet Socialist Republics (USSR) in 1991, Russian agriculture, which until then had been dominated by sovkhozes and kolkhozes, had suffered a drastic fall in domestic production, in particular in animal production. Over the past fifteen years, and due to a policy encouraging investment in agriculture, especially in agro-industrial complexes where the integration model prevails, agricultural production progressed rapidly, at least in certain sectors, including cereals, poultry meat and pork. This development of domestic supply and the diversification of supplier countries (including the United States, Brazil, etc.) had, even before the embargo imposed since August 2014, led to a substantial loss of European exports to Russia. Since the embargo was effective, Russia is no longer a privileged partner for European animal productions. Thanks to the growth of imports in several Asian countries, especially in China, several European animal sectors have nevertheless managed, despite the closure of the Russian market, to increase their exports. This paper deals, first of all, with the main stages of the Russian agricultural and trade policy, the development of agricultural production in this country, and the implementation of the embargo. Using customs statistics data (from BACI and COMEXT databases) over the period 2000 to 2016, it then discusses the evolution of trade flows following the implementation of the embargo, with particular emphasis on Russia's bilateral relations with the EU in four animal sectors: milk and milk products, beef and veal, poultry meat, and pork.
    Keywords: International Relations/Trade
    Date: 2018
  24. By: David S. Jacks; John P. Tang
    Abstract: In this chapter, we describe long-run trends in global merchandise trade and immigration from 1870 to 2010. We revisit the reasons why these two forces moved largely in parallel in the decades leading up to World War I, collapsed during the interwar period, and then rebounded (but with much more pronounced growth in trade than in immigration). More substantively, we also document a large redistribution in the regional sources of goods and people with a shift from the former industrialized core countries—especially Europe—to those in the former periphery—especially Asia—as well as a very striking change in the composition of merchandise trade towards manufactured goods precisely dating from 1950. Finally, using a triple differences framework in combination with a dramatic change in US immigration policy, we find evidence that immigration and trade potentially acted as substitutes, at least for the United States in the interwar period.
    JEL: F10 N30 N70
    Date: 2018–09
  25. By: Borazon, Elaine, Q; Supangco, Vivien T.
    Abstract: This study aims to determine the effect of supply chain integration on the business performance and competitiveness of Philippine small and medium enterprises. A survey of 384 small and medium enterprises was done and structural equation modeling was used to test the hypothesis. Results show that internal integration strongly influences (p
    Keywords: Philippines, competitiveness, small and medium enterprises, SMEs, supply chain integration, business performance, structural equation modeling
    Date: 2018
  26. By: Ly, Bora
    Abstract: This article emphasizes the importance of the technical and vocational education and training (TVET) challenges and constraints to meet the needs of the labor market and human resource development and technical expertise, which urgently need a strategy to achieve its industrialization. It is worth noting that achieving this goal requires a policy framework and direction, as well as profound changes in the organization and delivery of TVET courses at all levels. This article should be incorporated into the design and delivery of vocational education and training courses at all levels, from vocational training institutions to helping to promote skills development and industrial development.
    Keywords: TVET Cambodia, skills constraints, labor-intensive, growth strategy, developing economic for Cambodia.
    JEL: A1 N3 O1
    Date: 2018–08–31
  27. By: Hsu, Wen-Tai (School of Economics, Singapore Management University); Lu, Yi (Tsinghua University); Luo, Xuan (INSEAD); Zhu, Lianming (Osaka University)
    Abstract: This paper studies the effect of foreign direct investment (FDI) on industrial agglomeration. Using the differential effects of FDI deregulation in 2002 in China on different industries, we find that FDI actually affects industrial agglomeration negatively. This result is somewhat counter-intuitive, as the conventional wisdom tends to suggest that FDI attracts domestic firms to cluster for various agglomeration benefits, in particular technology spillovers. To reconcile our empirical findings and the conventional wisdom, we develop a theory of FDI and agglomeration based on two counter-veiling forces. Technology diffusion from FDI attracts domestic firms to cluster, but fiercer competition drives firms away. Which force dominates depends on the scale of the economy. When the economy is sufficiently large, FDI discourages agglomeration. We find various evidence on this competition mechanism.
    Keywords: Industrial agglomeration; Ellison-Glaeser index; Competition; Foreign direct investment; Special economic zones; WTO; China
    Date: 2018–09–02
  28. By: Hian Teck Hoon (Singapore Management University); Margarita Katsimi (Athens University of Economics and Business); Gylfi Zoega (University of Iceland; Birkbeck, University of London)
    Abstract: We estimate the relationship between investment and unemployment over the time period 1960-2015 in 20 OECD countries. While neoclassical growth theory typically assumes full employment – with no effect of investment on unemployment – we find that over our sample period covering more than five decades, a statistically significant negative relationship does exist: when investment fell, unemployment increased. When the time period is broken down into two sub-periods to take account of the Great Recession, we find that the estimated coefficient of investment is slightly smaller when the period 2001-2015 is added to the 1960-2000 period. We also find a positive effect of the current account surplus on unemployment that very likely works through investment. A non-monetary model shows how an increase in policy uncertainty that sharply contracts investment and raises unemployment can lead to an increase in current account surplus.
    Keywords: Long swings of unemployment, investment, current account, Great Recession.
    JEL: E10 E22 E24
    Date: 2018–09

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