The Singapore Economic Review

Intervention to support export initiatives is commonplace in both industralized and developing countries. Such intervention is underpinned by the view that exporting is good for growth, typified by the success of the South East Asian tiger economies. Yet, while the evidence is largely macroeconomic, most intervention is microeconomic, targeted at specific firms or industries. Recently a new literature has developed that is microeconomic and microeconometric, exploring determinants of entry into and survival in export markets. Key within this literature is the relationship between firm productivity and exports. This paper reviews the theoretical and empirical contributions to this literature and evaluates its contribution to our understanding of the factors driving export decisions and the consequences of export market entry from both. In addition to assessing the importance of new insights being generated, this paper speculates on new directions in which the research agenda will evolve.

This paper attempts to distil the key conclusions from the very large literature on the empirics of growth and to apply them to the development record of the five major Southeast Asian economies for which we have reasonably long-term data — Indonesia, Malaysia, The Philippines, Singapore and Thailand. These five display a considerable range of development outcomes, ranging from consistently high growth, to episodes of boom and crisis, and to low average growth. After estimating a series of general empirical models from a large sample of countries, we examine how well these fit the observed outcomes in these particular Southeast Asian countries. Our broad finding is that the average model does reasonably well in explaining outcomes in Singapore and Thailand, but that the residuals for Indonesia, Malaysia and the Philippines are quite large and persistent across different specifications.

It has long been recognized that, in a restricted world of just two countries and two commodities, any feasible non-distorting international transfer can be replaced by a pair of individually distorting but collectively non-distorting equivalent import duties. In recent years it has sometimes been suggested that equivalence persists in broader contexts and there have been two attempts to provide interesting sufficient conditions for equivalence. Our purpose is three-fold. We first note that the sufficient conditions so far provided relate to the equilibrium values of endogenous variables (like prices) rather than to the given values of exogenous variables (like endowments, technologies and preferences) and that conditions of the former kind may be difficult to empirically justify. It is then shown, by means of a robust example with conditions imposed on exogenous variables only, that equivalence cannot be relied upon when there are more than two countries, even when the countries have no extraordinary features. Finally, we emphasize some of the difficulties in implementing equivalent tariffs even when they do exist.

In 1972, the potential gainfulness of free trade was established under fairly general assumptions — essentially those of Arrow and Debreu. Since then, the assumptions have been considerably weakened, notably by accommodating overlapping mortal generations and an infinite horizon. However, there remain several indispensable but implausible assumptions. Two of those assumptions are examined, in a preliminary way, in the present paper: (a) in finite trade models of Arrow–Debreu type, each individual is sufficiently ill-informed or irrational to believe that he/she has no market power; (b) in models of overlapping generations and infinite horizons, there are no intergenerational bequests or gifts inter vivos. Few clear generalizations are found. However, an attempt is made to describe circumstances under which assumptions (a) and (b) can be abandoned.

This paper provides an empirical analysis of the impact of economic regulation on the inflow of private foreign investment in the infrastructure sector in Asian economies over the period 1988 to 2002. The results confirm that foreign investment in infrastructure has responded positively to the establishment of an effective regulatory framework which provides regulatory credibility to the private sector. The main policy implication of the findings is the need to support capacity building and institutional strengthening for robust and independent regulation in the developing countries of Asia.

People's common propensity to value losses more than otherwise commensurate gains, gives rise to different values of positive and negative changes in entitlements depending on the measure used to assess them. A major implication of the differing valuations is a need to choose an appropriate measure for particular changes. The appropriate choice of measure appears to turn on the reference state that people use to weigh the values of gains and losses: the distinction between the compensating and equivalent variation measures of values. If people view the present state as expected and normal, then the compensating measures apply; the equivalent variation measures are appropriate if they view the changed state as the reference.

The Smith dilemma refers to the inconsistency ("strictly an error") between the Smith theory on the efficiency of the market based on the absence of increasing returns and the Smith theorem on the facilitation of the economies of specialization (which gives rise to increasing returns) by the extent of the market. This paper argues that, despite the prevalence of increasing returns, Adam Smith was largely right on the efficiency of the invisible hand and hence that the Smith dilemma does not really exist. Ignoring separate issues such as environmental disruption, the market is very efficient in coordinating the allocation of resources even in the presence of increasing returns. The efficiency due to the automatic and incentive-compatible adjustments, free trade and enterprise (entry/exit) largely prevails. The Dixit–Stiglitz model shows that the free-entry market equilibrium coincides with the (non-negative profit) constrained optimum when the elasticity of substitution between products is constant. For non-constant elasticities, the divergences between the market equilibrium and the constrained optimum in output levels, in the numbers of firms and in utility levels are shown to be small.

More than half of the world's old live in Asia, and around 35% in India and China alone. As demographic transition proceeds regionally and globally, the development of a robust and reliable longevity insurance market will become essential. Although the need for such insurance is most pressing in Asia, longevity risk is poorly managed practically everywhere. This paper reviews theory and practice relating to longevity risk and insurance, amid a rapidly changing demographic and policy landscape. It analyzes the reasons for the failure of longevity insurance markets, and examines possible innovations in both markets and public policy that may lead to a more vibrant market and a greater variety of longevity insurance products. These include risk sharing between the buyer and seller, "deductibles", reverse mortgages, and securitization.

Capital gains play an essential role in the intertemporal allocation of resources, but they can also fuel self-fulfilling bubbles. The simple case of 2 "identical" capitals is analyzed in an overlapping generations model. The only trajectory in which expectations are realized at every date is the one in which blue machines and red machines have the same price. If ever their prices differ, then there is a "bubble" which must burst in finite time.

Global biodiversity loss and its consequences for human welfare and sustainable development have become major concerns. Economists have, therefore, given increasing attention to the policy issues involved in the management of genetic resources. To do so, they often apply empirical methods developed in behavioral and experimental economics to estimate economic values placed on genetic resources. This trend away from almost exclusive dependence on axiomatic methods is welcomed. However, major valuation methods used in behavioral economics raise new scientific challenges. Possibly the most important of these include deficiencies in the knowledge of the public (and researchers) about genetic resources, implications for the formation of values of supplying information to focal individuals, and limits to rationality.

These issues are explored for stated-preference techniques of valuation (e.g., contingent valuation) as well as revealed preference techniques, especially the travel cost method. They are illustrated by Australian and Asian examples. Taking into account behavioral and psychological models and empirical evidence, particular attention is given to how elicitation of preferences, and supply of information to individuals, influences their preferences about biodiversity. Policy consequences are outlined.

Todays' American mercantile pressure on China to appreciate the renminbi against the dollar is eerily similar to the American pressure on Japan to appreciate the yen that began over 30 years ago. There are some differences between the two cases, but downward pressure on Chinese interest rates from foreign exchange risk could lead China into a zero interest rate liquidity trap much like the one that Japan has suffered since the mid-1990s.

In this paper we consider a class of the GMM estimators for a linear simultaneous equation model with panel data. The model is characterized by the presence of unobserved individual effects as part of structural disturbances and by the correlation of certain time-varying and time-invariant exogenous variables with the individual effects. A class of single-equation and system GMM estimators is proposed on the basis of a class of instruments as a unifying theme. Small-sample performance of this class of estimators is also investigated by a series of sampling experiments.

This paper attempts to explain why growth rates and why growth levels differ so much among the 17 economies in East Asia. The EGOIN theory, the Triple C Theory and the S Curve Theory are used in the explanation. The three hypotheses in the three cognate theories are also tested for their general validity against the growth experiences of the 17 economies. Four statistical tables and six specially prepared graphs are used to support the author's presentation.