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on South East Asia |
| By: | Djankov, Simeon; Qian, Yingyi; Roland, Gérard; Zhuravskaya, Ekaterina |
| Abstract: | We compare results from a pilot study on entrepreneurship in China and Russia. Compared to non-entrepreneurs, Russian and Chinese entrepreneurs have more entrepreneurs in their family and among childhood friends, value work more relative to leisure and have higher wealth ambitions. Russian entrepreneurs have a better educational background and their parents were more likely to have been members of the communist party but Chinese entrepreneurs are more risk-taking and greedy and have more entrepreneurs among their childhood friends. |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5705&r=sea |
| By: | Piketty, Thomas; Qian, Nancy |
| Abstract: | This paper evaluates the prospects for income tax reform in China during the coming decade (with a comparison to India), and argues that such reforms should rank high on the policy agenda in these two countries. Due to high average income growth and sharply rising top income shares during the 1990s and early 2000s, progressive income taxation is about to raise non-trivial tax revenues in China and India and to become an important political object. According to our projections, the income tax should raise at least 4% of Chinese GDP in 2010 (versus less than 1% in 2000 and 0,1% in 1990), in spite of the 20% nominal rise in the exemption threshold that took effect in 2004. The fact that progressive income taxation is becoming an important policy tool has important consequences for China’s ability to finance social spending and to keep under control the rise in income inequality associated to globalization and growth. Due to faster income growth and to a higher fraction of wage earners in the labor force, the prospects for income tax development look better in China than in India. This potential is however limited by the fact that Chinese top wage-earners are under-taxed relatively to top non-wage income earners. |
| Keywords: | income distribution; income taxation |
| JEL: | E25 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5703&r=sea |
| By: | Lane, Philip R.; Schmukler, Sergio |
| Abstract: | Three main features characterize the international financial integration of China and India. First, while only having a small global share of privately-held external assets and liabilities (with the exception of China’s FDI liabilities), these countries are large holders of official reserves. Second, their international balance sheets are highly asymmetric: both are “short equity, long debt.” Third, China and India have improved their net external positions over the last decade although, based on their income level, neoclassical models would predict them to be net borrowers. Domestic financial developments and policies seem essential in understanding these patterns of integration. These include financial liberalization and exchange rate policies; domestic financial sector policies; and the impact of financial reform on savings and investment rates. Changes in these factors will affect the international financial integration of China and India (through shifts in capital flows and asset/liability holdings) and, consequently, the international financial system. |
| Keywords: | capital flows; China; financial integration; India; world economy |
| JEL: | F02 F30 F31 F32 F33 F36 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5852&r=sea |
| By: | Djankov, Simeon; Qian, Yingyi; Roland, Gérard; Zhuravskaya, Ekaterina |
| Abstract: | Social scientists studying the determinants of entrepreneurship have emphasized three distinct perspectives: the role of institutions, the role of social networks and the role of personal characteristics. We conduct a survey from five large developing and transition economies to better understand entrepreneurship in view of these three perspectives. Using data from a pilot study with over 2,000 interviews in 7 cities across China, we find that controlling for institutional environment entrepreneurs in China are much more likely to have family members who are entrepreneurs as well as childhood friends who became entrepreneurs, suggesting that social environment plays an important role in entrepreneurship. Entrepreneurs also differ strongly from non-entrepreneurs in their attitudes toward risks and their work-leisure preferences, echoing Schumpeter. Finally, failed entrepreneurs score the worst on aptitude tests, but have the best self-reported performance in school and perceive the business environment as least favourable. |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5706&r=sea |
| By: | Dwayne Benjamin (University of Toronto); Loren Brandt (University of Toronto); John Giles (Michigan State University and IZA Bonn) |
| Abstract: | We explore the relationship between the level of village inequality in 1986, and the subsequent growth of household incomes from 1986 to 1999. Using a detailed householdlevel data set from rural China, we find robust evidence that initial inequality is negatively related to subsequent household income growth. We are able to address a number of econometric issues that affect the use of aggregate data for this exercise, especially measurement error and aggregation: Our results strongly suggest that village inequality has an external adverse impact on household-level income trajectories. However, once we account for possibly fixed village-level unobserved heterogeneity, we find no evidence that changes in inequality are correlated with household income growth: Whatever factor drives the inequality-growth relationship only operates in the “long run.” We explore several possible avenues by which initial inequality – or an unobserved variable correlated with it – affects household income growth. While we do not find the precise mechanism, our findings point toward a class of explanations based on collective choice (like the provision of public goods or determination of local taxes), and away from credit-market based explanations. |
| Keywords: | inequality, growth, rural China, panel data |
| JEL: | O12 O15 P20 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2344&r=sea |
| By: | Hasan, Iftekhar (BOFIT); Wachtel , Paul (BOFIT); Zhou, Mingming (BOFIT) |
| Abstract: | There have been profound changes in both political and economic institutions in China over the last twenty years. Moreover, the pace of transition has led to variation across the country in the level of development. In this paper, we use panel data for the Chinese provinces to study the role of legal institutions, financial deepening and political pluralism on growth rates. The most important institutional developments for a transition economy are the emergence and legalization of the market economy, the establishment of secure property rights, the growth of a private sector, the development of financial sector institutions and markets, and the liberalization of political institutions. We develop measures of these phenomena, which are used as explanatory variables in regression models to explain provincial GDP growth rates. Our evidence suggests that the development of financial markets, legal environment, awareness of property rights and political pluralism are associated with stronger growth. |
| Keywords: | economic growth; institutions; financial markets; China |
| JEL: | O16 O53 P14 P16 |
| Date: | 2006–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2006_012&r=sea |
| By: | John Giles (Michigan State University and IZA Bonn); Ren Mu (World Bank) |
| Abstract: | Recent research has shown that participation in migrant labor markets has led to substantial increases in income for families in rural China. This paper asks how participation is affected by elder parent health. We find that younger adults are less likely to work as migrants when a parent is ill. Poor elder parent health has less impact on the probability of employment as a migrant when an adult child has siblings who may be available to provide care. We also highlight the potential importance of including information on non-resident family members when studying how parent illness and elder care requirements influence the labor supply decisions of adult children. |
| Keywords: | migration, health, aging, rural China |
| JEL: | O12 O15 I12 J14 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2333&r=sea |
| By: | Obstfeld, Maurice |
| Abstract: | In the face of huge balance of payments surpluses and internal inflationary pressures, China has been in a classic conflict between internal and external balance under its dollar currency peg. Over the longer term, China’s large, modernizing, and diverse economy will need exchange rate flexibility and, eventually, convertibility with open capital markets. A feasible and attractive exit strategy from the essentially fixed RMB exchange rate would be a two-stage approach, consistent with the steps already taken since July 2005, but going beyond them. First, establish a limited trading band for the RMB relative to a basket of major trading partner currencies. Set the band so that it allows some initial revaluation of the RMB against the dollar, manage the basket rate within the band if necessary, and widen the band over time as domestic foreign exchange markets develop. Second, put on hold ad hoc measures of financial account liberalization. They will be less helpful for relieving exchange rate pressures once the RMB/basket rate is allowed to move flexibly within a band, and they are best postponed until domestic foreign exchange markets develop further, the exchange rate is fully flexible, and the domestic financial system has been strengthened and placed on a market-oriented basis. |
| Keywords: | China balance of payments; China currency; fixed exchange rate exit strategy; renminbi |
| JEL: | F32 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5771&r=sea |
| By: | Girma, Sourafel; Gong, Yundan; Görg, Holger |
| Abstract: | We investigate whether inward FDI, either at the firm or industry level, has any impact on product innovation by Chinese State owned enterprises (SOEs). We use a comprehensive firm level panel data set of Chinese SOEs covering the period 1999 to 2003. Our results show that foreign capital participation is associated with higher innovative activity. Inward FDI in the sector has a negative effect on innovative activity in SOEs. However, there is a positive effect of FDI on SOEs that export, invest in human capital or R&D, or have prior innovation experience. We also find that SOEs with internal R&D activity and human capital development are successful innovators. Hence, our results suggest that rather than relying on sector level inward FDI to improve domestic innovative activity, it is important to get the firm-level fundamentals right. |
| Keywords: | China; competition; FDI; innovation; spillovers; state-owned enterprises |
| JEL: | F23 O31 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5838&r=sea |
| By: | Cadot, Olivier; de Melo, Jaime; Portugal-Pérez, Alberto |
| Abstract: | With FTAs under negotiation between Japan and AFTA members and between Korea and AFTA members, preferential market access will become more important in Asian regionalism. Protectionist pressures will likely rise with Rules of Origin (RoO), the natural outlet for these pressures. Based on the experience of the EU and US experience with RoO, this paper argues that, should these FTAs follow in the footsteps of the EU and the US and adopt similar RoO, trading partners in the region would incur unnecessary costs. Using EU trade with its GSP and ACP partners, the paper estimates how the utilization of preferences would likely change if AFTA were to veer away from its current uniform RoO requiring a 40% local content rate. Depending on the sample used, a 10 percentage point reduction in the local value content requirement is estimated to increase the utilization rate of preferences by between 2.5 and 8.2 percentage points. |
| Keywords: | AFTA; ASEAN; market access; NAFTA; PANEURO; preferential trade agreements; rules of origin |
| JEL: | F13 F15 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5783&r=sea |
| By: | Vladimir Popov (NES) |
| Abstract: | This paper starts by separating the transformational recession (reduction of output in most transition economies in the first half of the 1990s) from the process of economic growth (recovery from the transformational recession) in 28 transition economies (including China,Vietnam and Mongolia). It is argued that the former (the collapse of output during transition) can be best explained as adverse supply shock caused mostly by a change in relative prices after their deregulation due to distortions in industrial structure and trade patterns accumulated during the period of central planning, and by the collapse of state institutions during transition period, while the speed of liberalization, to the extent it was endogenous, i.e. determined by political economy factors, had an adverse effect on performance. In contrast, at the recovery stage the ongoing liberalization starts to affect growth positively, whereas the impact of pre-transition distortions disappears. Institutional capacity and reasonable macroeconomic policy, however, continue to be important prerequisites for successful performance. |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cfr:cefirw:w0068&r=sea |
| By: | Baldwin, Richard |
| Abstract: | This paper addresses the final steps to global free trade – what they might look like, what sort of political economy forces might drive them, and what the WTO might do to guide them. Two facts form the point of departure: 1) Regionalism is here to stay; world trade is regulated by a motley assortment of unilateral, bilateral and multilateral trade agreements; 2) this motley assortment is not the best way to organise world trade. Moving to global duty-free trade will require a multilateralisation of regionalism. The paper presents the political economy logic of trade liberalisation and uses it to structure a narrative of world trade liberalisation since 1947. The logic is then used to project the world tariff map in 2010, arguing that the pattern will be marked by fractals – fuzzy, leaky trade blocs made up of fuzzy, leaky sub-blocs (fuzzy since the proliferation of FTAs makes it impossible to draw sharp lines around the big-3 trade blocs, and leaky since some FTAs create free trade ’canals’ linking the big-3 blocs). The paper then presents a novel political economy mechanism – spaghetti bowls as building blocs – whereby offshoring creates a force that encourages the multilateralisation of regionalism. Finally, the paper suggests three things the WTO could do to help. |
| Keywords: | domino effect; juggernaut effect; multilateralism; regionalism; RTB unilateralism; trade |
| JEL: | F10 F13 F15 F2 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5775&r=sea |
| By: | Papaioannou, Elias; Portes, Richard; Siourounis, Gregorios |
| Abstract: | Foreign exchange reserve accumulation has risen dramatically in recent years. The introduction of the euro, greater liquidity in other major currencies, and the rising current account deficits and external debt of the United States have increased the pressure on central banks to diversify away from the US dollar. A major portfolio shift would significantly affect exchange rates and the status of the dollar as the dominant international currency. We develop a dynamic mean-variance optimization framework with portfolio rebalancing costs to estimate optimal portfolio weights among the main international currencies. Making various assumptions on expected currency returns and the variance-covariance structure, we assess how the euro has changed this allocation. We then perform simulations for the optimal currency allocations of four large emerging market countries (Brazil, Russia, India and China), adding constraints that reflect a central bank’s desire to hold a sizable portion of its portfolio in the currencies of its peg, its foreign debt and its international trade. Our main results are: (i) The optimizer can match the large share of the US dollar in reserves, when the dollar is the reference (risk-free) currency. (ii) The optimum portfolios show a much lower weight for the euro than is observed. This suggests that the euro may already enjoy an enhanced role as an international reserve currency ('punching above its weight'). (iii) Growth in issuance of euro-denominated securities, a rise in euro zone trade with key emerging markets, and increased use of the euro as a currency peg, would all work towards raising the optimal euro shares, with the last factor being quantitatively the most important. |
| Keywords: | currency optimizer; euro; foreign reserves; international currencies |
| JEL: | F02 F30 G11 G15 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5734&r=sea |
| By: | Staffiero, Gianandrea (IESE Business School) |
| Abstract: | We present an explanation of the high frequency of team production and high level of peer monitoring found in Japanese firms, in terms of a simple and empirically grounded variation in individual utility functions. We argue that Japanese agents are generally characterized by a higher degree, with respect to their Western counterparts, of aversion to unfavorable inequality, a feature which explains seemingly puzzling experimental evidence. In combination with long term employment and various organizational practices, this creates the conditions for obtaining willingness to exert mutual monitoring and peer pressure which facilitates the convergence towards cooperative equilibria in dilemma type situations. |
| Keywords: | Team Production; Fairness; Cooperation; Punishment; Reciprocity; |
| JEL: | C91 C92 D63 H41 L23 |
| Date: | 2006–09–05 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0645&r=sea |
| By: | Ross H. McLeod |
| Abstract: | The World Bank's new series of Doing Business reports attempt to measure the relative ease of doing business in countries around the world. The output of this research is a set of rankings that enable each country to see how it looks relative to the others from the point of view of private sector businesses. This paper highlights a number of concerns about the Doing Business methodology, and presents a critique of the 'law and finance' view regarding the influence of legal system origins on countries' economic performance, which was highly influential in the first of the Doing Business reports. Selected data from the 2006 report are used to explain why Indonesia is having difficulty getting back to Soeharto-era rates of economic growth. The report's findings in relation to Indonesia are then interpreted within the framework of an analysis of the way the Soeharto 'franchise' operated. |
| Keywords: | business regulation, contract enforcement, law and finance, legal heritage |
| JEL: | K2 K4 L51 P14 P52 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:pas:papers:2006-12&r=sea |
| By: | Shibao Guo (University of Calgary); Don J. DeVoretz (RIIM, Simon Fraser University and IZA Bonn) |
| Abstract: | This paper reports findings from a Vancouver study which examines the settlement and adaptation experience of Chinese immigrants in Vancouver. The study reveals that noneconomic reasons, such as the environment, education and citizenship, constituted the primary motivations for Chinese immigrants to move to Canada. Employment and language facilities were the most frequently cited barriers inhibiting their integration into the Vancouver social and economic spheres. Their poor economic performances coupled with the devaluation of both their acquired Chinese education qualifications and labour market experience have hindered integration and increased dissatisfaction with their lives in Canada. Given the logic of our posited triangular migration model we argue that this dissatisfaction will encourage Chinese emigration from Vancouver. |
| Keywords: | Chinese immigrants, emigration, integration, triangle theory |
| JEL: | J15 J61 J60 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp2340&r=sea |
| By: | Richard Yao; Gerald Shively Author-X-Name- Gerald; William Masters Author-X-Name- William (Department of Agricultural Economics, College of Agriculture, Purdue University) |
| Abstract: | We investigate the Philippine government’s price stabilization policy for rice. Seemingly Unrelated Regressions are used to examine the effectiveness of the program at regional and national levels over a 21-year period (January 1983 to December 2003). Results of the regional analysis indicate some NFA-induced spatial and temporal differences in terms of producer prices. The NFA successfully increased producer prices in 5 of 13 regions through stock accumulation and paddy rice purchase at floor prices. NFA stock releases do not correlate strongly with retail prices at the national level, although results from the regional model indicate that NFA stock releases reduced retail prices in five regions, leading to perceptible spatial and temporal differences between regions. Although the NFA support price appears to have been moderately successful in increasing producer prices at a national level, on average, the support price led to an increase in consumer prices in ten regions and contributed little to price stabilization. Overall, therefore, our results indicate very limited success on the part of the NFA to achieve its major objectives at either regional or national level. We suggest the NFA should concentrate its resources in the poorest areas of the country, where it might exert greater and more useful influence in smaller and locally thin rice markets. |
| Keywords: | Philippines, rice, price supports, markets, commodity storage, food policy |
| JEL: | Q11 Q18 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:pae:wpaper:05-06&r=sea |
| By: | Rose, Andrew K |
| Abstract: | A stable international monetary system has emerged since the early 1990s. A large number of industrial and a growing number of developing countries now have domestic inflation targets administered by independent and transparent central banks. These countries place few restrictions on capital mobility and allow their exchange rates to float. The domestic focus of monetary policy in these countries does not have any obvious international cost. Inflation targeters have lower exchange rate volatility and less frequent “sudden stops” of capital flows than similar countries that do not target inflation. Inflation targeting countries also do not have current accounts or international reserves that look different from other countries. This system was not planned and does not rely on international coordination. There is no role for a center country, the IMF, or gold. It is durable; in contrast to other monetary regimes, no country has yet abandoned an inflation-targeting regime in crisis. Succinctly, it is the diametric opposite of the post-war system; Bretton Woods, reversed. |
| Keywords: | capital; controls; durable; exchange; finance; fixed; inflation; rate; regime |
| JEL: | F02 F10 F34 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5854&r=sea |
| By: | Fugazza, Marco; Robert-Nicoud, Frédéric |
| Abstract: | This paper uses a combination of Ethier (1982) and Melitz's (2003) models to show that liberalizing trade among developing countries, so-called South-South trade, could contribute to improve the access to international markets of developing countries' would-be exporters. Lower trade barriers among developing countries has the effect of lowering the price of intermediate inputs and eventually allows exporters in those countries to serve international markets. We also compare unilateral and multilateral South-South trade liberalization and find that the latter unambiguously reduces the price of intermediates in all participating countries, whereas the former has ambiguous effects. |
| Keywords: | input-output linkages; market access; South-South trade; value chain |
| JEL: | F12 F13 F15 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5699&r=sea |