Aiding regional instability? The geopolitical paradox of Japanese development assistance to China

During the past decade, Japan established itself as the largest bilateral donor of development aid in the world, with more of it directed toward projects in China than any other recipient. Japan sees its aid flows to China as maintaining economic stability in East Asia, particularly as China's raw material and energy resources are articulated into regional markets. In this article, I argue that Japan's aid to China may unintentionally diminish Japan's and the East Asian region's long‐term security for two reasons. First, similar to other nations receiving such assistance, this aid may allow China to reallocate scarce capital to military modernisation. Such military modernisation may enable China to both better suppress internal dissent and carry out a more aggressive foreign policy. Second, this aid does not address the fundamental structural aspects of China's present instability. Long‐term structural instability has many sources, but the two discussed here are socio‐economic inequality (both interregional and intraregional), and sustainable production and environmental problems. Taken together these have important regional and geopolitical implications and repercussions. This article fills a gap in the existing literature on East Asian geopolitics. Namely, that by attending only to relatively short‐term corporate and perceived state interests of China and Japan, Japanese aid to China does little to ameliorate and potentially exacerbates long‐term structural social and environmental problems for China's vast majority living in rural hinterlands. The potential for internal turmoil springing from this uneven and unsustainable development inside China is the real basis for China's ‘threat’ to East Asian security. Thus what appears to make good development and geopolitical sense at first look, Japan's current aid regime with China, paradoxically may actually be the worst path to follow.     

On Human Capital Characters of the Party and Government Leaders

In the era of knowledge-based economy, human capital has become the primary resource in our society. The party and government leaders are key human capital in economic development. However, what is the value of the party and government leaders in economic development? Are they as important as or even more important than the entrepreneurs? Very few studies have covered these points. This paper aims at providing answers to the above questions by analyzing the human capital of the party and government leaders. This paper mainly illustrates nine features of the human capital in the party and government: the high level, the measurement by public effect, “entrepreneurs” in managing public resources, the key of human capital, the logical precondition of other human capital, the scarcity, the irreversibility, the asymmetry, and the diversification. It concludes that party and government leaders are a special human capital, which differs from both the ordinary human capital and the entrepreneurs in the private sectors. Therefore, more attention should be paid to the selection of the party and government leaders and the rewards corresponding to their contributions to public benefits.     

Watching out for regional separatism in the Russian far East: Ideological cueing of territorial security,economic incentives and cultural identity

Why has regional separatism failed to materialise in the post‐Soviet Russian Far East despite the region's remoteness from Russia's European heartland, its proximity to the Pacific Rim economies, the decline of economic support from Moscow, and a ‘frontier’ culture of resistance to Moscow's rule? Focusing on political developments in Primorskii Krai ‐ the key frontier province in the Russian Far East ‐ the study finds that territorial security, economic incentives, and cultural identity affect proclivities for regional separatism selectively, depending on ideological and institutional constraints in which centre‐periphery relations are embedded. In the absence of ideological commitments and enforceable institutional rales and norms, centre‐periphery conflicts devolve into economic bargaining and rule‐manipulation by elites for quick material gains. The changing ideological context amidst post‐Soviet institutional transition in Russia provide the most consistent explanation of conflict dynamic between Primorskii Krai's leaders and Moscow, of the non‐emergence of regional separatism, and of gross economic mismanagement of the province.     

R&D financing and growth

ABSTRACT

R&D investment are an important engine of growth and development. Yet economists have often claimed underinvestment, based on the consideration that these projects are more costly to finance, especially, due to the asymmetric information between inside and outside investors. Coherently, a recent empirical evidence has shown that firms intensively active in R&D are less leveraged and rely more heavily on internal finance. Motivated by this evidence, we study the effects of asymmetric information and financial frictions within a GE economy of Schumpeterian tradition. The model and equilibrium concept are rich enough to represent investment and innovation decisions, technology adoption/diffusion through patent licensing and, most importantly, firms' financial decisions. In this representation, R&D-intensive firms might effectively rely more on internal sources and equity than on debt financing, relative to what would happen in frictionless markets. Further, financial decisions affect aggregate investment and income dynamics.     

The evasion of fiscal and labor regulations: Firm behavior and optimal tax policy

Firms face many fiscal and labor regulations, but they may evade these legal requirements in several different ways. We develop a model that captures these two types of evasion decisions and unlike existing literature assume firms can evade labor regulations independently from income tax responsibilities. We characterize firms’ entry and evasion behavior and find that the design of the tax system can generate both positive and negative correlations between evasion decisions consistent with what is observed empirically. We then characterize optimal government policies given the firms’ decisions. We obtain intuitive optimal tax rules that highlight the trade‐offs the government faces when firms have multiple margins on which to evade.     

DEFENDING THE INDEFENSIBLE? CULTURE'S ROLE IN THE PRODUCTIVE/UNPRODUCTIVE DICHOTOMY

Abstract

The purpose of this article is to reveal the justifications for different production boundaries historically. It finds that the boundaries were and are predicated on an untenable productive/unproductive dichotomy that was justified on select and shifting cultural norms. Furthermore, the production boundary informed other categories like labor, capital, income, and wealth. Hence, this article exposes the degree to which economic categories were and are unstable, fragile, contested, and culturally embedded constructs. It then explores feminist-inspired production boundaries based on third-person criterion and finds that these boundaries are likewise culturally contingent. However, these new production boundaries merely do what economics has always attempted to do, which is to theorize production under different cultural circumstances. This article reaffirms the mutually constitutive role of culture and economic categories.     

Political Leaders' Socioeconomic Background and Public Budget Deficits: Evidence from OECD Countries

This paper empirically analyzes the relationship between political leaders' socioeconomic backgrounds and public budget deficits utilizing panel data on 21 OECD countries from 1980 to 2008. Building on sociological, as well as economic research, we argue that the socioeconomic status of political decision‐makers, i.e., presidents or prime ministers, is an important determinant of fiscal budget decisions. Our theory‐consistent findings show that the tenures of lower‐class leaders – i.e., leaders of low socioeconomic status – are associated with a deficit‐to‐GDP ratio which is 1.6 percentage points higher than that during tenures of upper‐class leaders.     

Confronting the Trilemma: Culture,Institutions, and Macroeconomic Disequilibria

Abstract

Although the fundamental trilemma of open-economy macroeconomics has been a popular framework for analyzing the effects of various policy combinations, it ignores how policy regimes change. Drawing from Post-Keynesian Institutionalist theory, this article considers this process in democracies as a type of technological change in which progress may be limited by insufficient knowledge and actions by vested interests. A case study of interwar France shows that these barriers often delay or weaken stabilization programs, which increase both political and economic uncertainty that further lowers aggregate demand and inhibits the attainment of macroeconomic equilibria. Although we should not generalize these observations, they suggest that understanding and addressing cultural and institutional factors may be necessary for successful countercyclical policymaking.     

EXPERIMENTAL WORK ON SUBSIDIES,MORAL HAZARD,AND MARKET POWER IN AGRICULTURAL MARKETS

Laboratory markets are created to capture the important features of agricultural commodity markets. Sellers make production decisions and hold inventories before goods are sold. In a posted‐bid auction environment, price supports create a moral hazard for sellers. Part of the price‐support subsidy is transferred to buyers in the form of lower prices, which are close to those predicted by the buyers' Cournot level. The subsidy program is expensive for this reason. Lump‐sum payments correct the moral hazard problem and are better at transferring income to sellers. However, transfers made at the beginning of each production period cause a decline in production levels. (JEL D44, C92)     

Postmodernity,globalisation and nationalist conflict in the former Yugoslavia

During the 1990s, several of the conflicts that have demanded most media attention have been associated with the disintegration of the Yugoslav Federation. A number of attempts have been made to outline the main causes of these, but these causal factors remain difficult to describe definitively, largely owing to the complexity of the post‐Yugoslav political landscape. This paper studies the validity of employing a postmodern paradigm for investigating the conflicts in former Yugoslavia, as well as other current conflicts, arguing that the present cultural and philosophical context has to be addressed. After an outline of some of the key aspects of postmodernity, the focus centres on the importance of the media and the postmodern perspective on the issue of the nation state. Key theories related to postmodern conflict, with relation to economic and cultural factors, are outlined. These are evaluated as regards their applicability to the Yugoslav conflicts and ‐ by extension ‐ to all future wars in the postmodern era.     

Homo Economicus,AIs, humans and rats: decision-making and economic welfare

ABSTRACT

Critics of economics often highlight two related issues: the empirical falsity of the ‘homo economicus’ assumption of rational, self-interested maximisation; and the ethical consequences of models based on this assumption. Yet many experiments in biology show non-human creatures often seem to behave as if they were rational maximisers, suggesting that context rather than cognitive capacity is important for determining behaviour. The critique of rational choice poses a less serious methodological challenge to economics than is sometimes thought. However, economists do need to respond to the ethical critique that decisions and policies based on the assumption of rational self-interested maximisation change the norms of individual behaviour for the worse. This paper argues that economics has become divorced from ethics because for a century it has dealt only with ordinal, not cardinal, welfare rankings and has thus ruled out interpersonal comparisons. While enabling economists to separate normative from positive analysis, this separation protocol has left welfare economics both internally contradictory and unable to address major societal decisions, even though welfare economics is used constantly in limited ways, such as cost-benefit analysis. This separation reflects empirically inaccurate assumptions concerning preference formation and the conditions of supply and demand (but not the rational choice assumption) in the foundational welfare economic theorems. Economics must urgently revisit welfare economics, particularly in the context of modern economies in which individuals are increasingly interdependent, and the assumptions required for the fundamental welfare theorems therefore increasingly invalid.     

Financing R&D in mature companies: An empirical analysis

We study financing patterns of publicly traded R&D-intensive manufacturing firms in Israel. We further characterize R&D-intensive firms by size, physical capital intensity, and whether they issued stocks in the United States, asking whether these features are associated with particular financing patterns. To address these issues, we present, for the first time, adjusted flow of funds charts that treat R&D expenses as a capital outlay (rather than an operating cost that reduces profits, as standard accounting principles prescribe). We also address the question of how R&D inputs should be measured - using R&D expenses or R&D personnel. We construct both expenditure- and personnel-based R&D measures for each firm in our sample, and investigate to what extent these measures are mutually consistent.     

THE POST‐ASIAN CRISIS DROP IN INVESTMENT: THE CASES OF INDONESIA,KOREA, MALAYSIA,AND THAILAND

This study analyzes drops in East Asian investment and their determinants after the 1997–1998 Asian financial crisis. We first employ a random level‐shift autoregressive model to quantify the shift in investment ratios of four Asian economies hit by the 1997–1998 Asian financial crisis: Indonesia, Korea, Malaysia, and Thailand. We trace the major historical shifts in the levels of investment ratios and we find that the cumulated downward shifts in investment ratios during 1997–1998 for Indonesia, Korea, Malaysia, and Thailand are 6, 5, 14, and 14 percentage points, respectively. The investment ratios of most countries experienced several rebounds between 1999 and 2001, but the rebounds were too small to bring investment ratios back to their pre‐1990 levels. Having identified the episodes of investment shifts, the Bayesian Model Averaging (BMA) and several robust tests are employed to investigate the determinants of those level shifts in investment ratios. We find that real per capita gross domestic product growth and banking crises are the two most important factors contributing to shifts in the investment levels of these four crisis‐hit Asian economies. The results are useful in understanding the causes and remedies of global imbalances. (JEL C11, E22, F32, O53)     

Globalisation,Hegemony and Passive Revolution

Across the social sciences the last decade has witnessed a proliferating interest in the relationship between the state and globalisation. By the early 1990s a range of writers working within what we label a structuralist approach asserted that globalisation is, if not challenging the viability of the sovereign state, then at least forcing it to adapt its policies to conform to the new global reality‐being 'hollowed out', as the phrase had it. The pendulum then swung the other way when an 'agent-centric' backlash emerged, insisting that states have what we call agential power, such that they can mitigate and even shape global structures. In this article we build upon an emergent third way, or 'structurationist' perspective, between these two antinomies, in which we synthesise structuralist and agent-centric theory. We begin in Part I by taking stock of the central issues in the state/globalisation debate and examine the various structuralistand agent-centric approaches, while Part II sketches the theoreticaloutlines of a structurationis t approach and conceptualises what we call the spatial promiscuity of the state. In Part III we apply this approach to the case of Singapore. We choose Singapore only because it provides an excellent litmus test for critically appraising the various positions on globalisation, including our own, not least because Singapore is a small state that has perhaps the most globalised economy in the world.     

ASIAN FINANCIAL LINKAGE: MACRO‐FINANCE DISSONANCE

How are Asian financial markets interlinked and how are they linked to markets in developed countries? What is the main driver of fluctuations in Asian financial markets as well as real economic activity? To answer these questions, we estimate the spillover index proposed by Diebold and Yilmaz and gauge the degree of interaction in both financial markets and real economic activity among Asian economies. We first show that the degree of the international spillover in stock markets is uniform, irrespective of the groups of countries concerned, such as the G3 and ASEAN4. This suggests the importance of global common shocks in stock markets. We then discuss the macro‐finance dissonance. In stock and bond markets, the United States has been the main driver of fluctuations. However, China has emerged as an important source of fluctuations in real economic activity.     

The Limits of the “Progressive” Institutional Change: Migration and Remittances Experiences

Abstract:

The financial and business expansion towards both sides of the Mexico-U.S. border, what could be called the financial diaspora that accompanies Mexican´s migration to the United States and U.S. Corporations to Mexico, has been a process full of nuances and components with different characteristics. Beyond the governments and their migratory and investment policies, the characteristics of the different migrant groups and corporations, the cultural gaps, and the “progressive” institutional changes are subject to a dynamic of survival-assimilation-earnings. Even when powerful trials of organization are observed, a strong and imminent current of regressive institutional change (Veblen) has been gaining space. This article is circumscribed to analyze some key aspects of the financial behavior Mexican migrants to the United States, who have become entrepreneurs, have had. Their enormous limitations of financing are exposed, including the different stages to access credit to the businesses of residents in Mexico and to Mexican businesspeople abroad. The article contends the transformation in financing on both sides of the border has been decisive.     

DETERMINANTS OF WOMEN'S MICROENTERPRISE SUCCESS IN AHMEDABAD,INDIA: EMPOWERMENT AND ECONOMICS

Abstract

Microenterprise success is often evaluated solely in terms of economic outcomes. These evaluations do not recognize how opportunities for success may differ across groups and contexts, and disregard the importance of power and control as factors in success. This article investigates the determinants of a two-dimensional concept of microenterprise success for women in Ahmedabad, India, by analyzing data from a 1998 study of home-based garment producers. Growing economic success for these garment producers decreased empowerment outcomes, which suggests that evaluating both economic and empowerment outcomes and their interactions is important to understanding the process of achieving success. Improving the economic outcomes of women's enterprises via better training and access to markets, credit, and capital equipment does not necessarily facilitate women's empowerment. Microenterprise scholars and practitioners must focus on improving women's status within their homes, so they may contribute to and benefit from the decisions made about how to use their resources.     

Gender Power,Fertility, and Family Policy

The birth of children often shifts the balance of power within a family. If family decisions are made according to the welfare function of the spouses, this shift in power might cause a time‐consistency problem. In a model of cooperative family decision‐making, we show that this problem can lead to a systematic downward bias in fertility. By keeping fertility low, spouses mitigate the ex ante undesired shift in the balance of power that results from the presence of children. This provides scope for welfare‐enhancing policy intervention. We discuss to what extent existing family policy measures are suitable for overcoming the bias.     

Development,Common Foes and Shared Values

There is considerable common ground among various positions--involving needs, capabilities, prudential values and basic goods--in the literature about advantage and development. The well-known debate about the relative merits of various spaces relating to advantage, associated with Amartya Sen, has tended to obscure this point. Differences among the relevant positions often have to do with the context in which they are developed, or strategies involved in dealing with common foes, rather than any fundamental divergence in values. The various lists of the components of advantage that these positions offer can, to some degree, be seen as relating to different levels in our concern about the quality of life. To this degree, they can be reconciled, and Sen's capability approach simply highlights an important level. Furthermore, both differences, as well as convergence, in the various lists, may be consistent with shared values.     

Exports,jobs, growth! Congressional hearings on US trade agreements

Who testifies on US trade agreements before Congress and what do they say? We examine the content of Congressional testimony on US trade agreements, and the selection process which determines who testifies in the first place. We find that testimony is systematically tilted toward a sunny view of trade's positive economic effects, while import competition and offshoring are generally downplayed. We argue that trade's supporters strategically frame their motives for supporting trade agreements, and that pro‐trade committee chairs’ decisions on who testifies further skew testimony away from the distributive consequences of globalization within the United States. Congressional hearings on trade agreements therefore represent a key site where the influence of dominant pro‐trade interests is both revealed and reinforced.