The Singapore Economic Review

In some Asian countries, households import young women from poorer countries to work as live-in caregivers and maids. These caregivers are typically less educated than the child’s mother, so academic performance may suffer. The effects of ever having a foreign maid, a private tutor or a working mother are examined for Malaysian teenagers. Contrary to expectations, those ever having a foreign maid perform better in school examinations, recent private tutoring has positive impacts but earlier tutoring does not, and there is little effect of maternal employment. These results suggest no adverse effects on human capital from outsourcing household production.

This study empirically examined unemployment dynamics in 12 countries in the Asia-Pacific region, namely, China, Hong Kong, Taiwan, South Korea, Japan, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Australia and New Zealand. It used quarterly data on the unemployment rates from the first quarter of 1980 to the first quarter of 2013. This paper employed three different econometric methods, including the recently-developed powerful unit root test with structural break (Lee and Strazicich, 2003, 2004) and the nonlinear unit root test (Enders and Lee, 2012). The findings indicated that the unemployment rates in five countries of the region, namely, China, Taiwan, South Korea, the Philippines and Thailand, had highly dynamic labor markets in which higher-than-normal unemployment rates would revert to the normal level. The other seven Asia-Pacific countries had less dynamic labor markets. The findings of this study have some important policy implications.

In this paper, we provide a measure for both the prevalence and growth effects of informality in Turkey using firm-level data from the Turkish Economy. The survey is conducted in April–May 2013 covering 1000 representative firms interviewing owners/head managers of the firms. Based on the information given by these owners and managers, the survey makes a complete characterization of several firm characteristics, provides complete information on the extent of informality as well as its effects on various economic outcomes of these firms. The cross-sectional econometric analysis we conduct using the survey data shows that there is an inverted-U relationship between a specific measure of informality and growth expectations of firms. These results shed light on our understanding of the specific channels through which informality affects firms’ growth not only in Turkey but in other emerging markets as well.

This paper empirically investigates the impact of Foreign Direct Investment (FDI) on inequality using a panel data set of 65 developing counties. While the existing literature mainly examines the impact of FDI on growth, this study explores the importance of domestic conditions of the host countries in determining the distributional effects of FDI. The results show that the impact of FDI is not homogenous on host countries as FDI inflows exert inequality-narrowing effect only in countries that have stronger investment in human capital, better financial sector and a high level of economic development. While FDI accentuates not ameliorates inequality in countries with low level of economic development, findings of the study are robust to the use of different specifications, different estimation methods, inclusion of regional effects and time specific effects.

This paper examines the short and long-run relationships between Foreign Direct Investment (FDI), Trade Openness and GDP in China, India and Mexico from 1980 to 2011. Based on the properties of individual time series data, the paper estimates the VAR or VECM of the three variables to determine short and long-run causal relationships. The results confirm the existence of long-run causal relationships between the three variables for China and Mexico. The results also point to sharp differences in short-run causal relationships in the three countries and several plausible explanations consistent with the findings are offered.

The Asia–Pacific Economic Cooperation (APEC) forum, whose approach is voluntary and non-binding in open regionalism, has been criticized for its alleged failure to develop a rapid liberalization process and to contribute to a greater level of intra-regional trade in the APEC region. Nonetheless, we find that APEC has been contributing to intra-regional trade creation, particularly in trade in manufactured goods as compared to trade in non-manufactured goods. This finding is robust to the various fixed-effect models and the first-differencing models which are applied to the gravity equation.

This paper uses income accounting techniques to assess, counterfactually, the implied impact over the last 10 years of a hypothetical government policy to constrain investment growth in order to raise the share of consumption in GDP and to bring about a balance on current account. We find that both target variables are very sensitive to changes in investment and that a policy of careful reform is called for. In the light of this finding, we review Chinese government policy pronouncements and activity with a view to assessing their appropriateness.

This paper investigates the role of the national institutional setting in explaining Single Market non-compliance regarding non-tariff barriers in intra-European Union (EU) trade. Using data on infringements to Single Market law we show that the quality of domestic institutional characteristics is relevant to explain non-compliance among EU countries. While government independence from political pressures and higher levels of representativeness and accountability reduce the propensity of member states to infringe upon Single Market laws, better regulatory quality increases the probability of non-compliance at industry level, suggesting that increases in competition may generate protectionist measures that violate Single Market law.

This paper analyzes the impact of the Eurozone debt crisis on China and India. Using Markov-switching analysis, we discern regimes in economic growth as well as financial markets and study the impact of the global financial crisis and Eurozone crisis on the same. We identify vulnerability and robustness factors governing the degree of exposure and resilience to the crisis for both these economies. In view of strong trade and financial linkages, the Eurozone crisis may have marred prospects of recovery in the aftermath of the recent Great Recession in both China and India. China, however, is found to be more resilient to the crisis possibly due to stronger macroeconomic fundamentals.

In this empirical study, we apply the Panel stationary test with both sharp and smooth breaks to re-examine the hysteresis hypothesis of unemployment for five high-debt countries, Portugal, Ireland, Italy, Greece and Spain (PIIGS) from 1960 to 2011. We find that our proposed model has greater power than a linear method if the true data-generating process of unemployment is a stationary, non-linear process of unknown form with structural changes. Hysteresis in unemployment is confirmed for all PIIGS countries when traditional unit root tests are employed; however, hysteresis in unemployment is confirmed only for Greece when our proposed Panel stationary test with both sharp and smooth breaks is utilized.

This paper compares Denmark's growth performance to that of the other 18 non-Eurozone OECD economies during 2008–2013. Denmark is the only country with a fixed exchange-rate regime; all the other 18 countries have flexible exchange rates, mostly as part of an inflation-targeting (IT) framework. At the same time, Denmark is the worst growth performer of all. Our analysis indicates that the lack of monetary policy independence is central to understanding the meager Danish performance. Monetary easing during 2008–2009 is an important predictor of economic growth during 2008–2013, and Denmark, having outsourced monetary policy to the ECB, did not pursue monetary easing as aggressively as most other countries. In fact, the Danish Central Bank was forced to raise its policy interest rate in 2008Q4 in order to defend the euro-peg. Overall, the Danish experience serves as a reminder that fixed exchange rates can be quite taxing on economic growth in the aftermath of a huge negative shock.

A detailed total cost of ownership (TCO) model, with well-to-wheel carbon emissions assessment, is developed to analyze the economic competitiveness of battery electric vehicle (BEV) against conventional internal combustion engine (ICE) vehicles in Singapore. The model fully integrates the unique economic, institutional and social features of Singapore related to the ownership and usage of a passenger vehicle into consideration. Assuming current technologies and no change in the regulatory and policy framework, it is found that BEV is already economically competitive in certain niche markets of Singapore, such as small and midsize vehicles for car-sharing and corporate uses. In the near future, with technological progress, BEVs will become competitive in most parts of the Singapore passenger vehicle market, including small vehicles for household and small and midsize vehicles for car-sharing, corporate and taxi uses. However, certain supportive policies are called for, based on policy simulation results, to effectively accelerate the adoption of BEVs. Evidence also shows that supports should be given to the development of charging infrastructure at an early stage of BEV adoption.

This paper estimates an adjusted gravity model by directly measuring downward wage rigidities based on our modified regime-switching specification in order to investigate the effect of labor market flexibility on the flows of foreign direct investment (FDI) between Korea and 18 counterpart countries. To measure wage–cost rigidities, we employ firm-specific sales data for 410,012 firms in 19 countries obtained from Compustat as a relevant driver of wage costs extracted from earnings data by International Labor Organization (ILO). Our results suggest that greater wage rigidities in a counterpart country are associated with less net-outflows of FDI in Korea.