Urban Shopping Patterns in Indonesia and Their Implications for Small Farmers

In developing countries, the expansion of supermarkets and other modern food retailers has raised concerns about the potential impact on traditional retailers and fruit and vegetable farmers. Will small farmers, in particular, be squeezed out of this growing, remunerative market by the quality standards imposed by supermarkets? In an attempt to answer this question, we analyse data from a stratified random sample of 1,180 urban households in Indonesia. We find that only a small share of fruits and vegetables are purchased from modern outlets, even among high-income urban households. On the basis of the relation between income and shopping patterns in our data, we project that even after 15 years of income growth, supermarkets will account for less than 40% of urban food spending. The impact of supermarket standards on small farmers may be less dramatic than has been feared.     

China＇s New Rural Income Support Policy： Impacts on Grain Production and Rural Income Inequality

I. Introduction Since the beginning of 2004, the Chinese Government has replaced its centuries-old policy of taxing agriculture by a new policy aimed at subsidizing agriculture and stimulating rural incomes. To this end, agricultural taxes – standing at around 8 percent of agricultural incomes – were drastically reduced. By now they are abolished in most provinces. Inaddition, farmers growing grain receive a direct income subsidy, new seed varieties and mechanization are subsidized, and la…     

Going Home: Evacuation-Migration Decisions of Hurricane Katrina Survivors

In the wake of Hurricane Katrina, many evacuees from the Gulf region began the difficult process of deciding whether to rebuild or restart elsewhere. We examine pre-Katrina Gulf residents' decision to return to the postdisaster Gulf region—which we call the “return migration” decision. We estimate two separate return migration models, first using data from a mail survey of individuals in the affected region and then focusing on self-administered questionnaires of evacuees in Houston. Our results indicate that return migration can be affected by household income; age; education level; and employment, marital, and home ownership status, but the results depend on the population under consideration. We find no effect of “connection to place” on the return migration decision. Although the effect of income is relatively small within subsamples, we find a much higher proportion of middle income households planning to return than lower income households when comparing across the subsamples. In addition, the real wage differential between home and host region influences the likelihood of return. Larger implicit costs, in terms of foregone wages for returning, induce a lower likelihood of return. Exploiting this difference at the individual level, we are able to produce estimates of willingness to pay (WTP) to return home. Average WTP to return home for a sample of relatively poor households is estimated at $1.94 per hour or $3954 per year.     

Consumption,financial wealth and labor income in Korea

By examining the relationship between consumption, financial wealth and labor income in Korea, this paper presents three key findings. First, we find evidence that Korean households hold a larger proportion of their wealth in human capital instead of financial wealth, compared to households in other countries. Potentially, this finding appears consistent with Koreans’ enthusiasm for human development through education despite low government funding. Another important finding is that only financial wealth fluctuations contain a large portion of temporary components. Hence, financial wealth is mainly responsible for adjustments to restore the long-run relationship between consumption, financial wealth and labor income during the examined period. Third, and perhaps most interestingly, this paper finds that before the 1997 Asian financial crisis, households in Korea had difficulty smoothing their consumption over time. This finding may be at least partly attributable to households’ limited access to bank loans and their low level of financial wealth accumulation prior to the crisis. In contrast, we find little evidence that households’ consumption behavior has changed during the recent global financial crisis.     

International relocation,difference in production costs,and welfare: An analysis based on a two-country model

This paper examines whether or not the globalization of Japanese companies is a problem for the Japanese economy. To examine this, using the theoretical model, the paper examines whether the globalization of home-located tradable goods firms provides a benefit to the home country from the perspective of welfare. Specifically, since globalization is thought to have begun based on the difference in production costs of the home and the foreign country, we examine how an increase of productivity in the foreign non-tradable goods sector, which is the principal factor in the difference in production costs between the two countries, affects the welfare of the home country. We show that such an increase of productivity not only induces enterprise relocation, but also improves the welfare of the home country. In particular, the latter is demonstrated by an increase in the real flow of dividends that results from holding equities in tradable goods firms located abroad, i.e., the improvement in the income account. Hence, since the prediction of the model indicates that the globalization of firms is not a problem, it can be said that the globalization of Japanese firms is not a problem for the Japanese economy.     

林毅夫现场答问录

李祥林:美国的债务问题很严重,您对美国债务问题有什么样的认识?林毅夫:美国的债务问题确实很严重。美国还没有进行真正的结构改革,只是在吃止痛药。我觉得,现在的美国有点像当年的日本,没有着手解决根本问题。因为美元是储备货币,美国可以实施宽     

HIV/AIDS AND POVERTY IN SOUTH AFRICA: A BAYESIAN ESTIMATION OF SELECTION MODELS WITH CORRELATED FIXED‐EFFECTS

In this paper, we estimate the causal impact of human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS) on monetary poverty using a panel database from South Africa. We treat endogeneity and selection problems associated with HIV/AIDS by a selection model that includes correlated fixed effects both in the level and in the participation equations, which are estimated simultaneously via original Bayesian methods. We model the consequences of the illness on both labour income and income transfers, and disentangle between urban and rural households. While no significant impact of HIV/AIDS on labour income is found because of households' recomposition, we find a substantial fall in received transfers among rural population and a dramatic increase in chronic poverty.     

Bank dependency on foreign funding and global liquidity shocks: The importance of US monetary policy for a developing country

We examine international spillover effects of US monetary policy on bank lending in Cambodia, using unique data about loan disbursements and the funding structures of Cambodian banks from 2013Q1 to 2019Q2. The banking sector in a developing country is likely dependent on foreign funding, while the dependency could be the source of vulnerability to international monetary and economic conditions. We empirically document that US monetary policy is likely to be transmitted to Cambodian bank lending through foreign funding. We also document that Cambodian banks change their risk-taking behavior in response to the spillover effects of US monetary policy. Furthermore, these results are robust for US monetary policy, but weak and not robust for the monetary policies of the Cambodian bank’s major shareholders’ home countries, suggesting that US monetary policy should be primarily taken into account in supervising banks that are reliant on foreign funding, in addition to domestic economic conditions.     

Bailouts,Inflation, and Risk-Sharing in Monetary Unions

This paper presents a new rationalization for bailouts of sovereign debt in monetary unions, such as those observed during the recent Euro crisis. It introduces a model where member countries of the monetary union are ex-ante identical, and each derives utility from consumption and disutility from the union-wide inflation rate. The union’s central bank is utilitarian and lacks commitment. Countries borrow or save in a market for nominal sovereign debt in response to idiosyncratic income shocks, with countries that receive positive income shocks saving and countries that receive negative income shocks borrowing. Ex post, the monetary union’s central bank will attempt to devalue sovereign debt through surprise inflation, as this will redistribute income from rich creditor countries to poor debtor countries. Creditor countries choose to bailout debtor countries because bailouts will weaken the redistributive motives of the central bank and forestall surprise inflation. As bailouts in this environment constitute a payment from lucky creditor countries to unlucky debtor countries, they mimic a risk-sharing arrangement that insures against income shocks. The payments made by creditor countries are incentive-compatible due to the shared currency and inflation rate in the monetary union. This ability of countries to provide each other with incentive-compatible insurance constitutes a novel theory of optimal currency areas. This insurance benefit of the monetary union is largest for countries with negatively correlated income shocks, in contrast to the classic Mundell-Friedman optimal currency area criterion.

     

International monetary transmission in East Asia: Floaters,non-floaters,and capital controls

This paper analyzes the impacts of the United States (US) monetary shocks on East Asian countries using structural vector-autoregression (VAR) model. We find that the impacts of the US monetary shocks on East Asian domestic interest rates and exchange rates contradict conventional wisdom. The conventional exchange rate channel is unlikely to play much role in the transmission of the US monetary policy shocks to floaters in East Asian countries, excluding Japan. In these countries, the domestic interest rates respond strongly to the US interest rate changes, by giving up monetary autonomy, probably because of fear of floating. However, the domestic interest rate does not respond much in countries with fixed exchange rate regimes and capital account restrictions, such as China and Malaysia. This may suggest that the countries with fixed exchange rate regimes enjoy a higher degree of monetary autonomy, most likely with the help of capital account restrictions.     

Corporate Social Responsibility,Firm Value and Corporate Governance Code Revisions: The Asian Evidence*

The present study examines the relationship between corporate social responsibility (CSR) and firm value, and the effects of corporate governance code revisions on the relationship. We examine this relationship for: (i) a high‐income country, Japan; (ii) middle‐income countries China, Malaysia and Thailand; and (iii) low‐income countries India and Indonesia. We use the Heckman two‐stage sample selection bias approach for the empirical analysis. We find that Japanese stakeholder CSR and environmental CSR have a smaller positive effect on firm value compared to the middle‐income countries, but we do not find any statistically significant association for the low‐income countries. In addition, we find that only Japanese corporate governance code revisions significantly contribute to the positive relationship between CSR and firm value, which concurs with the new recommendations documented in the revised codes of corporate governance. The present study reveals that foreign major shareholders matter to the value creation of CSR in Japan and the middle‐income countries of China, Malaysia and Thailand.     

Do households care about cash? Exploring the heterogeneous effects of India's demonetization

The recent demonetization exercise in India is a unique monetary experiment that made 86 percent of the total currency in circulation invalid. In a country where the currency in circulation constitutes 12 percent of GDP, the policy turned out to be a purely exogenous macroeconomic shock that affected all agents of the economy. This paper documents the impact of this macroeconomic shock on households. By construction, the policy helped households with bank accounts in disposing of the demonetized cash. We use a new household-level data set to tease out the effects of this policy on households with no bank accounts relative to households with bank accounts. Our results show that the impact of demonetization on household income and expenditure has been transient. We find that households with no bank accounts experienced a significant decrease in expenditure in November and December-2016. We find a slight decline in income in November-2016 but the effect dissipates thereafter. There is significant heterogeneity in the impact across households in different asset quartiles. We also show evidence of recovery of household finances whereby households were able to smooth out consumption during the post-demonetization period. However, this recovery phase is associated with an increase in household borrowing from different sources. In particular, informal borrowing (e.g. money lenders and shops) increased during this period.     

International trade and income distribution: reconsidering the evidence

This article reassesses the link between international trade and income distribution. We argue that one way to assess the influence of international trade upon income distribution is to take account of each country’s specific trade patterns by measuring the changes in the factor content of trade. The econometric specification is based on changes in Gini indices (over non-overlapping 4-year intervals), computed exclusively from series drawn from the same source. Our results show that a change in the factor content of trade has a significant impact on income distribution. The sign and magnitude of this impact is conditional on the national income level. We find that an increase in the labor content of trade raises income inequality in poor countries, but reduces it in rich countries (the reverse is true for the capital content of trade). In particular, we show that in the 1980s and 1990s, international trade may have contributed significantly to widening income inequalities in developing countries.     

Is income a good welfare indicator for Spanish households? A comparison between both distributions

This paper compares the income and welfare distributions of Spanish households, with the objective of determining whether the first is a good indicator of the second. We consider different inequality measures of both adjusted income and welfare. The results show that the income ranking does not represent the welfare ranking of households and, secondly, that monetary inequality is higher than welfare inequality, which gives support to the idea that leisure time has a compensating effect on household welfare.     

Fiscal policy independence in a European Monetary Union

Do plans for a monetary union in Europe call for limits on the freedom of the country members of the union to use fiscal policy? In order to provide a tentative answer, we simulate the IMF model MULTIMOD, given various shocks, in the case of a European Monetary Union consisting only of France and Germany. The results clearly indicate the possible value of allowing unfettered use of fiscal policy in both countries. The reasons lie partly in differences in the initial position of the two, partly in differences in their preferences. We also examine the change in the policy significance of the current account in the monetary union. Current account imbalances clearly cease to have the same significance in a monetary union; but they do not therefore become irrelevant.     

Digital Financial Inclusion and Consumption Smoothing in China

In this paper, we investigate the effect of digital financial inclusion (DFI) on household consumption smoothing in China. We use four waves of the biennial China Family Panel Studies from 2010 to 2016, during which time DFI has significantly developed alongside financial technology across China. We split household income shocks into permanent and transitory components, and evaluate if DFI may help households to buffer against these shocks. We find that households are not able to insure against permanent shocks to income, but they can smooth approximately 70 percent of transitory shocks to income. We also find that DFI has diminished households’ ability to insure against transitory income shocks. This is partly because online purchase may lead to the oversensitivity of consumption to income. In addition, we find that contrary to DFI, traditional financial sector development contributes to better household consumption smoothing against transitory income shocks.     

Pooling my personal account: Income responses to the payroll tax in China

Developing countries collect not only a far lower share of GDP in taxes, but also less payroll taxes than rich countries. This paper explores income responses to the payroll tax by evaluating the 2006 pension reform that subtracted 3 percentage points of employees' Defined Contribution account in China. First, our estimate of total income elasticity with respect to the pension rate is larger than 2, implying a lower optimal payroll tax rate than in rich countries. Second, we separate total income into labor and non-labor income, and show significant income shifting from labor to non-labor income. Third, we provide suggestive evidence that income responses to the pension reform are from evasion rather than real responses. We emphasize the necessity of administrative capacity for developing countries to extend the pension system. Remarkably, sharing the employer payroll tax with employees may be a self-enforcement mechanism, similar to the value-added tax, of the payroll tax.     

LINKING POVERTY AND INCOME SHOCKS TO RISKY SEXUAL BEHAVIOUR: EVIDENCE FROM A PANEL STUDY OF YOUNG ADULTS IN CAPE TOWN

Is there a link between household income and income stress, and risky sexual behaviour of young people? Anecdotal and qualitative evidence suggests this may be the case, but there is little quantitative research measuring this relationship. We use two waves of new data from the Cape Area Panel Study to investigate this link for 2,993 African and coloured youths aged 14 to 22 in 2002. In the process, we discuss one type of research design that could allow for a causal interpretation of the effect of income poverty on HIV risk. This design plausibly separates out the effect of income stress from the effect of living in a poor household by comparing behaviours across households with and without negative economic shocks, conditional on baseline income. Our results indicate that females in poorer households are more likely to be sexually active in 2002 and more likely to sexually debut by 2005. In addition, girls in households experiencing negative economic shocks are more likely to reduce condom use between 2002 and 2005. However, they are less likely to have multiple partners in 2002 or have transitioned to multiple partners by 2005. Males who experienced a negative shock are more likely to have multiple partners. Despite the tight research design for assessing shocks, the findings on the impacts of shocks do not generate clear recommendations for policy. There appears to be no systematic difference in condom use at last sex by household income levels or income shocks.     

The Feldstein-Horioka puzzle: The IS-LM model with optimal policy

The high correlations between saving and investment, which suggest a small variability of the current account, is explored within an IS-LM framework. While Feldstein and Horioka interpret this evidence to imply a low degree of capital mobility, the pattern of shocks to the model is also important. If the monetary authorities are pegging domestic rates to foreign returns, then we would expect the Feldstein-Horioka evidence even under high mobility. We explore whether such a rule is optimal when policymakers wish to avoid income variability where fiscal and monetary policy are coordinated and where monetary policy must act alone. We suggest that the Voicker Federal Reserve switched to the latter stance and created a dramatic exception to the Feldstein-Horioka paradox.     

Income volatility,household leverage,and consumption in Korea

Using the micro household data in Korea, we examine the effects of income volatility changes on households’ leverage and consumption. We found that households who faced increased income volatility lowered their leverage ratio. A one standard deviation increase in income volatility was associated with 1.3 ∼ 1.5 percentage point decrease in the leverage ratio. The effects of income volatility changes on households’ leverage choices varied with households’ borrowing constraints and other socioeconomic backgrounds. We also found that when faced with enlarged income uncertainty, households’ income coefficients on consumption were lowered. The income coefficient of average households was estimated to be around 0.16, while households with increased income volatility were around 0.12. In particular, similar to the relations in leverage ratio changes, consumptions among potentially borrowing-constrained households and those with ‘net-short’ position in real estate assets were more affected by increases in income volatility. This can be understood that households smoothed their consumption during the periods of increased income volatility, and this was shown in the smaller consumption elasticity on income. This can be attributed to the fact that faced with increased income volatility, households lower the risk exposure of their financial net wealth by lowering their leverage ratio.