The Singapore Economic Review

This paper investigates whether Chinese factor markets became more integrated in the period around World Trade Organization (WTO) accession. This would have required reductions in factor price dispersion. However, prices for 18 agricultural factors between 1998 and 2001 and for 118 industrial factors between 1999 and 2002 varied significantly across 36 cities. Variation declined temporarily for industrial factors, but not for agricultural factors. Sixteen factors displayed many city-specific price components, suggesting that they may have been subject to domestic trade restrictions. Idiosyncratic prices for agricultural factors were concentrated in two cities. However, most cities had idiosyncratic prices for at least some industrial factors.

In this study, we argue that the conventional intra-industry trade (IIT) index does not directly address the quality issue and propose a methodology to make full use of unit price gap information to deduce quality differences between simultaneously exported and imported products. By applying this measure to German trade data at the eight-digit level, we study the quality change of Chinese export goods in its IIT with Germany. We compare the case of China with those of Eastern European countries, which are also major trading partners of Germany. Our results show that the unit value difference in IIT between Germany and Eastern European countries is clearly narrowing. However, China’s export prices to Germany are much lower than Germany’s export prices to China, and this gap has not narrowed over the last 23 years. This is at odds with the common perception that China’s product quality has improved, as documented by Rodrik [Rodrik, D (2006). Whats so special about China’s exports? China and World Economy, 14(5), 1–19.] and Schott [Schott, P (2008). The Relative sophistication of Chinese exports. Economic Policy, 53, 5–49.]. Our results support Xu [Xu, B (2010). The sophistication of exports: Is China special? China Economic Review, 21(3), 482–493.], which argued that incorporating the quality aspect of the exported goods weakens or even eliminates the evidence of the sophistication of Chinese export goods in Rodrik [Rodrik, D (2006). Whats so special about China’s exports? China and World Economy, 14(5), 1–19.].

This paper examines entry deregulation in an industry where natural monopoly and potential competition are vertically related. We find that the upstream fixed cost plays an important role to affect the overall welfare comparison between total and partial deregulation. When the upstream fixed cost is sufficiently large, the number of downstream firms is limited in both situations; in other words, the duplication of downstream fixed costs is relatively irrelevant so that the double markup effect dominates. Consequently, the regulator can only replicate total deregulation to maximize social welfare in the event of partial deregulation. If it is the case, we suggest that total deregulation is superior to partial deregulation since the latter suffers more regulatory cost than that of the former.

Using unique survey data on rural secondary school children, this paper evaluates the relative quality of Islamic secondary schools (i.e., madrasahs) in Bangladesh. Students attending registered madrasahs fare worse in maths and English than students attending non-madrasah schools. However, failure to account for non-random sorting overestimates the negative influence of madrasahs on student’s achievement. Evidence on the magnitude of this bias is presented. Once selection effect is taken into account, the madrasah’s disadvantage in English is small while that in maths becomes insignificant. Given the overall low level of achievement, this suggests that madrasah students perform just as poorly as those from non-madrasah schools in rural Bangladesh.

This paper employs an overlapping-generations (OLG) model with altruistic motive and lifetime uncertainty to investigate the urban public pension system in China. Focusing on the case of Beijing, we examine the effects of the individual contribution rate, firm contribution rate, life expectancy and population growth rate on the capital-labor ratio, savings, per capita consumption and pension benefits. By controlling the firm contribution rate to adjust the capital-labor ratio of the market economy to the modified golden rule level, we find the optimal firm contribution rate. We also discuss the optimal firm contribution rate in Beijing under three cases: risen life expectancy, fallen population growth rate and the joint case of risen life expectancy and fallen population growth rate, and estimate the optimal firm contribution rate in 2020s. Integrating the established effects and the current economic goals, it is concluded that it will do more good than harm to strictly implement Beijing municipal population policy, improve the living and medical conditions, reduce the firm contribution rate, and raise the individual contribution rate.

Analyzing financial development and investment in Turkey between 1960 and 2008, this paper illustrates how financial development affects investment decisions in a dynamic model of the firm under financial frictions. A composite index is constructed of three alternative financial development measures. The bounds testing approach was used to test for the existence of long-run levels relationships and long-run levels relationships were estimated using the autoregressive distributed lag method. Both short- and long-run causality tests were performed. Results indicate that financial development, budget balance, and total credit to the private sector positively and significantly affect investment.

This study examines the effects of a fertility subsidy that was instituted in specific regions in Korea in 2004. The value of the subsidy ranged from $4000 to $9000 (2004 US$) depending on the area of residence. Using a difference-in-differences estimation strategy, we measure the effects of the policy on childbearing and migration in and out of the subsidized areas. Our estimates for migration suggest that the policy significantly increased the net inflow of females into the subsidized areas. This effect is driven roughly equally by a decrease in the outflow from and an increase into the subsidized areas. Our estimated effects on fertility are in line with previous results from the literature; we find that a $1000 increase in fertility subsidies leads to a 0.108% increase in the chance of bearing a child for all age groups (21 to 45). Our results show that the policy increased total births in 2005 by 11,000 and that the vast majority of this increase was from the 21 to 33 cohort.

Rapid unmanaged growth of population and properties in metropolitan areas has increased the societal vulnerability to disasters. While the first step in disaster economic risk management is the quantification of economic losses, modeling unexpected events by equilibrium-oriented economic models which assume gradual and incremental changes over time and uniform spatial impacts poses analytical challenges. In this paper an integrated, operational methodology for evaluating the effects of earthquake on the economy based on the various types of losses and their relations is developed. A case study of Tehran shows future losses caused by studied earthquake scenarios will be more than 70% of gross regional product (GRP). Finally, a number of solutions for reducing negative impacts are introduced.

This paper examines the determinants of total factor productivity (TFP) in the Malaysian automotive industry, focusing on the effectiveness of government policies. Our panel data analysis shows that the productivity of the automotive industry in Malaysia highly depends on the technology embodied within imports. Government policies have not contributed to the technological upgrading of the industry. The policies to protect the domestic producers from international competition and to favor bumiputra firms seem to have adverse impacts on productivity.

This paper empirically investigates the relationship among the tax evasion and local disposal income, unemployment rate and demographic variables by using 20 municipalities in Taiwan with the official interior, latest, and wider range of panel data over the period from 1998 to 2011. The main findings support the positive impact of disposal income on tax evasion, while unemployment rate has a negative impact. Among the interest rate effect models, if policy-makers want to hinder the extension of tax evasion, they should reduce the interest rate. Furthermore, government not only applies fiscal policy but also applies monetary policy for improving tax evasion. In our regional effect model, we have found evidence on a positive impact of the demographic structure variables on tax evasion except social expenditure of local government. We have also found clear evidence on the positive impact in South and East areas on tax evasion in the regional effect model. Moreover, both interest rate and regional factors have an influence on tax evasion.

The study examines the half-life deviations from purchasing power parity (PPP) using both linear and nonlinear models for the sector specific real exchange rates of the Pacific Rim countries. By using a linear benchmark model, the estimated half-life deviations from PPP of about/or less than 3 years seemingly solve the PPP puzzle. After re-examining them using nonlinear forms, the PPP puzzle for most sectoral real exchange rates in the study still remains. More specifically, we find that deviations from PPP by TAR are persistent and take much more time for mean reversions especially for non-tradable sectors using logistic STAR / exponential STAR (LSTAR/ESTAR). The major reasons might be that conventional studies have failed to control the possible nonlinearity of real exchange rates, and have disregarded the possible bias of any single numèraire country. Finally, we also show the speed of mean reversion for real exchange rates by sectoral prices (tradable and non-tradable).

Considering 11 major Asian migrant sending countries during 1975–2012, the study explores the factors that motivate migrants to remit their earnings to home countries. Using panel regressions, it finds that it is primarily the growth rate and interest rate differentials between the home and host, the household consumption and financial sector development at home along with per capita income of host countries which lead to remittances inflows. It concludes that it is not only the altruistic (or consumption) and higher interest income motives; but also the patriotic motives reflected from significant impact of past remittances, are crucial factors of such flows.

Real estate investment has recently been advancing rapidly in both volume and complexity. A sound understanding of behavioral issues in this sector benefits all stakeholders, such as investors, regulators and local residents. We focus on one of the most robust behavioral anomalies in business and finance research: overconfidence. Overconfidence significantly influences financial decision and investment performance. However, theoretical and empirical studies are lacking in real estate sector. We conduct a critical review of the overconfidence literature to bridge this gap, identify future research directions for the study of overconfidence in real estate markets, and suggest strategies to handle technical issues, such as the robustness of overconfidence measurement and data availability. Findings provide useful guidelines for researchers and practitioners to design and implement overconfidence studies in real estate research.