Showing papers in "Journal of The Asia Pacific Economy in 2015"

Crime rates and inequality: a study of crime in contemporary China

Abstract: This paper examines the impact of intra-provincial regional inequality on crime rates in China. The results suggest that the western theories of crime can be applied equally to China. The crime rate is found to be positively correlated with intra-provincial regional inequality, but negatively correlated with the level of education. In addition, it is also observed that the crime rate is positively linked with the level of inflation, unemployment rate, as well as inequality in consumption and employment between the rural and urban sectors. The results lend strong support to Merton's theory and Marxian theory. However, the rational choice theory is not supported.

Industrialization and labour in Malaysia

Abstract: Although increasing globalizations spurred rapid industrialization in Malaysia, this article shows that the lack of significant technological upgrading and structural change has caused the premature plateauing of manufacturing, stemming from failures to coordinate policies, enforce standards, sustain high productivity growth and stimulate transition to higher value-added activities. Manufacturing as a whole has registered slow wage growth since the late 1990s, with labour markets characterized by heavy presence of low-skilled foreign workers, increased contract labour and outsourcing and declining worker organization. The focus on perspiration-based low-skilled foreign labour rather than on expanding professional and skilled labour has driven Malaysia down the low industrialization road. The Malaysian experience reflects a case of manufacturing's importance and direct contribution to the economy contracting before recording high levels of value added and sustained productivity growth, and with labour mark...

Does openness lead to sustained economic growth? Export growth versus other variables as determinants of economic growth

Abstract: This research revisits the issue of economic growth determinants in developing countries with a focus on international integration variables. Four alternative variables are tested, namely, export growth, trade openness, export diversification, and foreign direct investment (FDI), in a single framework. This study finds that export growth is the most robust, in addition to export specialization, and that traditional variables of trade openness and FDI are not robust. This result is based on the econometric estimations that use not only cross-section and fixed-effect panel estimations but also system generalized method of moments estimations. The findings warn against the traditional emphasis on simple trade openness and FDI as policy prescriptions for developing countries. In other words, simply opening an economy for international integration does not guarantee sustained economic growth unless these actions lead to export growth, which requires capability building in indigenous firms and investments in in...

Education expansion and returns to schooling in urban China, 2001–2010: evidence from three waves of the China Urban Labor Survey

Abstract: This study examines the effect of the expansion in education that occurred in the first decade of the twenty-first century on the returns to schooling in urban China for migrants and non-migrants using three waves of the China Urban Labor Survey (CULS), corresponding to 2001, 2005 and 2010. Our main finding is that the premium to education increased by about 2%–3% over a period in which there was a rapid increase in education levels. This result is consistent with the demand for skilled labor increasing at a time when China tries to move up the value-added chain and an observed increase in urban wage inequality. We find that the education premium is higher for non-migrants than migrants and higher for males than females.

Measuring productivity change in higher education: an application of Hicks–Moorsteen total factor productivity index to Malaysian public universities

Abstract: This paper offers an in-depth analysis of efficiency and productivity changes using the Hicks–Moorsteen total factor productivity index, in the context of higher education institutions. Unlike the Malmquist method, this approach makes no assumptions about firms' returns to scale conditions. We assume that the production technology exhibits variable returns to scale, which is more plausible than the constant returns to scale assumption, because universities usually operate at suboptimal scales. Three major groupings of Malaysian public universities are used in our case study: research, comprehensive, and focused universities. The results show that technical efficiency has improved after the 2007 National Higher Education Strategic Plan within all the three university groupings.

Female labour force participation, infant mortality and fertility in Malaysia

Abstract: In reviewing the population policy in 1984, the Malaysian government called for a major shift from family planning to family and human resource development to achieve an ultimate population of 70 million by 2100. However, regardless of the government's initiatives since 1984, Malaysia's fertility rate still declined. This study examines the short-run and long-run relationship and causality between female labour force participation rate, infant mortality rate and fertility in a developing country in Asia – Malaysia. We employ the unit root test which allows for two structural breaks, and the break dates are then used as dummy variables in the bounds testing procedure within an autoregressive distributed lag (ARDL) modelling approach and Granger-causality test. The results indicate that mortality changes have a significant and positive long-run impact on fertility rate and women's child bearing decisions are unaffected by their employment situation. In addition, we do not find evidence that presence of chil...

Growth, industrialisation and inequality in India

Abstract: The Indian growth process has been marked by the relative absence of structural change and the inability of faster output expansion to shift people out of low-productivity activities into higher value ones. Recent rapid growth has also been based on and resulted in growing inequalities. Private accumulation has relied upon existing social inequalities that create segmented labour markets that keep wages of certain social categories low, and on types of exclusion that allow large-scale displacement and dispossession without adequate compensation. The associated boom has required debt-driven bubbles to provide domestic demand since incomes of the masses have not risen in tandem, but such a strategy is inherently unsustainable. This growth process is now reaching the limits of its viability and is facing constraints posed by economic, social, political and environmental challenges.

Does development zone have spillover effect in China

Abstract: We construct a new database of spatial relations between industrial firms and development zones using the Application Programming Interface addressing and document the development zones' spillover effect on firms' total factor productivity (TFP). Development zones significantly improve the TFP of surrounding firms, which attenuates with the distance from a development zone, and increases with the density of development zones in a given area. The spillover effect of national development zones decays more sharply than that of provincial ones. The rectification project improves firms' TFP and the spillover effect of development zones. The establishment of development zones affects surrounding firms' TFP, where TFP of newly entered firms decreases in the short term but soon rises rapidly.

Growth and employment in de-industrializing Philippines

Abstract: The Philippines was rated in the early 1960s by the World Bank as second only to Japan in Asia's industrialization race. In the 1970s–1990s, the Philippines pursued export-oriented industrialization (EOI). However, the Philippines’ industrial drive failed to take off and we trace this failure to the narrow program of EOI that Philippines pursued with the support of international financial institutions, which was myopic because it simply focused on how to open up the economy without a focus on industrial upgrading. There were no value-adding linkages with the domestic economy, home-grown export champions, program for upgrading and infrastructure and support institutions for national producers. The failure is due to the absence of systemic governance and policy coherence. Nonetheless, the Philippines has posted positive growth rates in recent decades, due largely to remittances of Filipino migrant but has helped transform the country into a service-sector-led economy without passing through industrial trans...

Globalization, industrialization, and labor markets in Vietnam

Abstract: This paper investigates the dilemmas of reaching the Vietnamese goal of ‘civilized and equitable’ society expressed from central planning towards a ‘socialist market economy under state guidance’ with deeper integration into the global capitalist system, and their impacts on the labor markets. Using long-run statistical data, historical contexts and industrial policies, and fieldwork interviews (from 1980s to 2014), we focus on two important labor-intensive, export-based industries: the long-established textile/garment industry and the emerging electronics industry, which surpassed textile exports in 2013. Evidence shows that the ‘high road’ to industrialization model – with domestic linkages and skills upgrading – does not accompany growth in exports, as low-skilled assembly, mostly young female workers join the labor force with non-liveable wages and substandard working conditions. These two case studies delve into different stages of industrial policy, which is more defined in the textile/garment case ...

Processing trade, export intensity, and input trade liberalization: evidence from Chinese firms

Abstract: How do reductions in input trade costs affect firm's sales decision between domestic and foreign markets? By using Chinese firm-level production data and transaction-level trade data during 2000–2006 to construct firm-specific input trade costs, we find rich evidence that a reduction in input trade cost for large trading firms leads to an increase in export intensity (i.e., exports over total sales). The impact is more pronounced for ordinary firms than that for hybrid firms which engage in both processing and ordinary trade since ordinary import enjoys the free-duty treatment in China. The declining input trade costs not only increase the probability of firm's being new exporters (i.e., extensive margin) but also lead to higher export intensity (i.e., intensive margin). Such results are robust to different empirical specification and econometric methods.

Globalization, industrialization and labour markets in China

Abstract: China's experience with globalization is still contested. This paper seeks to examine the impact of global integration and industrialization on labour markets in China. The evidence shows that rising trade and flows of foreign direct investment has not only quickened industrialization and structural change but it has also stimulated a rapid rise in overall and manufacturing real wages. The government's framework of absorbing marketization while maintaining planning control through decentralization has been critical in the development of technological capabilities in manufacturing. Although the nature of economic development after reforms has also widened regional inequalities with the Eastern coastal provinces enjoying higher growth and structural change than the Western and other inland provinces, rising wages suggest that the material conditions of the majority of workers in China have improved.

Growth target management and regional economic growth

Abstract: The share of the east in national economy has decreased for the first time during the past three decades. Based on the fact that the economic growth target set by government dominates this new trend, we put forward the hypothesis that governments employ the investment growth target to manage the economic growth target. We construct a novel provincial panel data, which matches actual economic data with target data from Report on the Work of the Local Governments (2001–2013), and find that effects of the investment growth target on the economic growth target are statistically and economically significant. We also find that only after the implementation of policies for promoting regional coordinated development, which is launched by the central government in the early of 2000s and ultimately transfers resources from the east to other regions, do these effects become significant.

Retirement savings investment decisions: evidence from Malaysia

Abstract: This paper investigates individual retirement savings investment choices of members of Malaysia's Employees Provident Fund (EPF). The focus is on the option available to EPF members to invest part of their savings in approved unit trusts. A survey of EPF members allows a contrast with existing empirical evidence, largely drawn from developed countries. Three significant factors are identified: perceived importance of financial advisor; financial risk tolerance and perceived plan design. Gender and marital status were also significant predictors of investing in the unit trusts, though religion and religious commitment were not significant. Several implications emerge from these findings. First, results highlight the important role of unit trust consultants in individuals’ choices which in turn highlights the important role of the governing body of consultants in ensuring appropriate advice is delivered to clients. The study is relevant to the EPF as policy-maker, on the behaviour and attitudes of its members.

Changes in Japanese industrial structure and urbanization: evidence from prefectural data

Abstract: We empirically analyzed the relationship between the change in industrial structure and urbanization using post-WWII data from Japanese prefectures. This study used three concepts of industrial structure, standard industrialization (enhancing of the non-agricultural sector), service industrialization, and the industrial upgrading (enhancing specialized service industries). We also focused on the different patterns of migration in the process of urbanization: intra-prefectural and inter-prefectural migration. The main results of the regression analysis are (1) during the period of rapid economic growth in Japan, industrialization induced population inflow from other prefectures, and this effect promoted urbanization in those prefectures. (2) During the same period, prefectures with relatively high shares of manufacturing attracted many migrants from other prefectures, and this effect promoted the urbanization. (3) Entering the period of economic stagnation, in the prefectures where industrial upgrading is ...

The aggregate production function and the measurement of technical change: ‘not even wrong’, by Jesus Felipe and John S.L. McCombie

Abstract: The thesis of this book is startlingly simple – all empirical growth theory based on aggregate production functions (APF hereafter) is flawed because all estimates of parameters such as the elastic...

The monetarist hypothesis of inflation in Pakistan – a critique

Abstract: The aim of the present study is to analyze empirically the significance of the monetarist explanation of inflation in Pakistan. After testing the data for stationarity, the method of least squares is used. Regression analysis shows slight effects of money supply on inflation while, by contrast, structural factors involving wheat, oil and import prices show more substantial effects. The effective control of inflation requires policy makers to smoothen the supply of food and to moderate import prices.

Industrialization, globalization and labour force participation in Thailand

Abstract: This article analyses the impact of globalization and industrialization on Thailand's labour market. While acknowledging the trend rise in wage employment in the labour force over the period 1971–2009, the article also shows that over half of the labour force has remained in non-wage employment, which has left a significant share of them vulnerable to the abuses of the capitalist system. The lack of technological upgrading has meant that employers have increasingly resorted to subcontracting work to informal homeworkers to compete in low value added activities. Outsourcing has also allowed employers to bypass the minimum wage legislation. Hence, we argue that it is important that workers from all forms of work are mobilized to strengthen the role of unions to ensure that there is a shift from the low to a high road to industrialization so that workers’ rights are protected.

The sophistication of East Asian exports

Abstract: Hausmann et al. found that countries that export more sophisticated products tend to subsequently grow more rapidly. We examine the sophistication of Asia's exports using Hausmann et al.'s and Kwan's measures. Japan remains the technology leader in Asia, but not in the world. In 2012, Japan's exports competed with those of South Korea and Taiwan and were complementary with those of China and ASEAN. Korea and Taiwan competed intensely with each other and less so with China and ASEAN. ASEAN countries competed extensively with each other. Given the high levels of competition and cooperation among East Asian countries, greater exchange rate stability in the region would reduce export volatility among competitors and facilitate trade among comrades.

Globalization, industrialization and labour markets

Abstract: While mainstream accounts of globalization are telling us that liberalization is essential for engendering the conditions of prosperity across the world, we argue that selective interventions are necessary to ensure that these processes open the path to the high road to industrialization. While recognizing the importance of relative surplus appropriation through technological deepening as the engine of capitalist accumulation, the extant evidence suggests that a proactive state focusing on enhancing labour is pertinent to ensure sustainable long-term industrialization and structural change so that the material conditions of workers improve over time. Hence, this article provides the introduction to globalization, industrialization and labour market experiences in selected East and South Asian economies.

The spillovers and heterogeneous responses of housing prices: a GVAR analysis of China's 35 major cities

Abstract: Previous literature seldom discusses city-level housing price spillovers and city-level heterogeneous responses of housing prices to interest rate shocks. This paper adopts the recently developed globe vector autoregression (GVAR) model to empirically study not only the spillovers of housing prices and real income per capita among China's 35 major cities but also the impacts of interest rate shocks on housing prices among these cities. The empirical results show that China's first-tier cities, such as Beijing and Shanghai, have comparatively large spillovers of housing prices, while spillovers in central and western cities are not significant. The housing prices of first-tier and eastern cities are affected not only by the real income per capita of these cities themselves, but also by that of other cities to a large extent, while housing prices of central and western cities are mainly affected by the real income per capita of these cities themselves. Real interest rate shocks have a smaller influence on t...

Effects of pharmaceutical price regulation: China's evidence between 1997 and 2008

Abstract: This study uses a macro-level data during the period between 1997 and 2008 to evaluate the effects of China's pharmaceutical price regulations. We find that the regulations exert short-run effects on pharmaceutical price indexes, reducing them by less than 0.5 percentage points. The effects can be slightly reinforced if the price regulations were to be applied to more medicines. The price regulations fail to reduce household health expenditures and the average profitability of the pharmaceutical industry. Moreover, firms on the break-even point are worse off after the implementation. Finally, although these regulations have no significant effects on the prices of medicinal substitutes or complements, they increase the importation of expensive medicines. These findings are also consistent with consumer perceptions of the pharmaceutical policies, based on the household survey data conducted in 2008.

Has the Chinese economy passed the Lewis turning point

Abstract: There are a number of studies related to whether China's economy has passed through the Lewis turning point or not. However, definitive conclusions have yet to be obtained. Some studies argue that China's economy has not yet reached the Lewis turning point, while some studies claim that China's economy has crossed it already. In this study, we estimate the marginal productivity of labor in China's primary industry based on province level data and suggest a different proxy for the survival wage compared to previous studies. We discovered that China's economy has passed through the Lewis turning point around 2002–2004. A similar conclusion was also obtained by relating the substitutive relation of labor and capital inputs in China's agricultural production.

A decomposition approach to labour market forecasting

Abstract: Recognising human capital's central role in economic development, many countries in the Asia Pacific region have allocated significant resources to the development of their education sectors. However, despite growing policy concern over acute mismatches between qualification supply and qualification demand, few of these countries have national systems for generating and disseminating employment forecasts. In this paper, we outline a forecasting method that is parsimonious in its data requirements, making it suitable for the often data-constrained research environments of the Asia Pacific's developing economies. We apply the method to Vietnam, a rapidly growing transition economy. The method generates detailed labour market projections, while also making transparent the underlying macroeconomic, structural and policy shocks that determine the forecasts. A decomposition of forecast outcomes in terms of the individual contributions of these shocks facilitates transparency in forecasting, by clearly distingui...

Globalization of industrialization and its impact on clothing workers in Myanmar

Abstract: This article examines the impact of foreign capital inflows and export expansion on employment and wages in the clothing industry in Myanmar. Although economic sanctions since 2003 by the United States affected foreign capital inflows, the evidence shows that clothing exports have steadily recovered since 2005. While wages in the industry are still low, they have improved over the period 2006–2012. Foreign firms showed higher mean wages, export-intensity and technological capabilities than national firms. The statistical results show that foreign equity has a positive impact on export-intensity and technological capabilities. Also, wages and employment were positively linked to export-intensity and technological capabilities. Hence, despite the exploitative nature of capitalist integration, the clothing industry shows that not only has wages and employment grown, the statistical results suggest that they will grow further.

Latecomer Upgrading in Taiwan

Abstract: Taiwan successfully upgraded its industries and entered into the high-tech industries in the last decades of the twentieth century. This essay examines how Taiwan achieved latecomer upgrading, by exploring the process by which its latecomer firms entered high-tech and modern services. It is found that the latecomer firms, called second movers here, entered high tech when the product just turned mature, and relied upon a different set of capabilities from those of the first movers in the advanced countries. The findings challenge prevalent orthodoxy, which includes open markets, increased foreign investment, small firms, and diminished state intervention. In reality, large domestically owned second movers rather than foreign enterprises or small networked firms have led Taiwan's entry into mature high tech. In the meantime, the government intervention has not been lessened, but has been adapting to the changing environment, in promoting high-tech industry and modern services.

Industrialization, globalization, and labor market regime in Indonesia

Abstract: This paper examines globalization, industrialization, and labor markets in Indonesia using a case study of manufacturing. It attempts to answer the question of how changes in the labor market after the 1997–1998 Asian Financial Crisis affected industrialization and labor market performance. The paper generates three main findings. First, the responsiveness of output to employment and wages to employment declined substantially over the period 1996–2006 but recovered in 2009. The decline could be a consequence of the implementation of rigid labor laws since 2003. The recovery in 2009 may reflect firms’ adjustment period to the new environment or simply that firms found different opportunities. Second, exporters generally show higher employment elasticity than non-exporters. However, since the implementation of the labor law, exporters tend to retain employment more than non-exporters when wages rise. Third, exporters began substituting labor with machinery as wages started rising.

The Poverty Burden: A Measure of the Difficulty of Ending Extreme Poverty

Abstract: The commonly used poverty gap measure is extended to derive and analyse the properties of a poverty burden measure to address the question of whether the elimination of poverty is a feasible objective, given sufficient political commitment. The resources potentially available to address poverty may be measured by the total amount by which the incomes of the non-poor exceed the same poverty line. The ratio of the poverty gap to the resources potentially available is equal to the proportional tax rate on incomes in excess of the poverty line that would be required to fund a transfer sufficient to raise the incomes of all poor people to the poverty line. We refer to this ratio as the ‘poverty burden’ and provide some empirical evidence of what is required to eliminate poverty.

Manufacturing servitization and revitalizing industrial clusters: a case study of Taiwan's LIIEP

Abstract: In the recent years, the ‘manufacturing servitization’ has been put at the center of Taiwan's industrial policies in order to solve the low value-added problem. In pursuit of regional development rebalance, industrial and technology policies are also hired to revitalize weak industrial clusters by using R&D grants and leveraging the capabilities of various public research institutes. Few studies examine the existence of potential policy dilemma in the redistribution of R&D resources to achieve purposes of the industrial upgrading by ‘manufacturing servitization’ and achieving regional development rebalance by reallocating R&D resources toward low-development regions or sectors. Drawing on the project office dataset of the ‘Local Industrial Innovation Engine Program’, with 907 samples, this study intends to provide with empirical evidence to address that ‘manufacturing servitization’ has been influencing the formation of R&D alliances further to allocating R&D resource bias to highly developed regions and ...

The impact of transformation on economic efficiency – a case study of financial holding companies in Taiwan

Abstract: The present study examines the question of whether the transformation of Taiwan's banks into financial holding companies (FHCs) has led to an improvement in operating efficiency. The results indicate that while comparison of FHCs and banks shows that FHCs are significantly more efficient than non-FHC banks, if the comparison is made in terms of efficiency before and after conversion to FHC status, then no significant increase in total factor productivity (TFP) is seen after conversion to FHC status. The study's results indicate that while the transformation of some Taiwanese banks into FHCs has made these banks more competitive vis-a-vis other, non-FHC banks, the conversion to FHC status has not made any significant contribution towards these banks’ own efficiency growth. Government should keep encouraging the conversion of FHC banks, and, furthermore, stimulate the FHC banks on financial reform and overseas market expansion in order to elevate the efficiency of Taiwan financial industry.