Estimating Cost Functions of Malaysian Commercial Banks: The Differential Effects of Size,Location, and Ownership*

Bank integration and competition policies are a core part of current financial reforms intended to strengthen the financial sector in Malaysia. This paper intends to clarify the production technology employed in Malaysian banks and indicate important policy implications for current bank consolidation policy. While it is essential to conduct a microeconomic analysis of the banking sector to appraise financial reform policy, Katib and Mathews (2000) is the only formal study in this area that uses micro level data on Malaysian banks. Our analysis expands on Katib and Mathews’ study in three aspects. Firstly, while Katib and Mathews employed Data Envelopment Analysis, we use estimation analysis based on a parametric approach. Secondly, we examine technological differences among Malaysian banks according to the size of operations, location of branches and ownership structure. Thirdly, we also explicitly incorporate the existence of hidden bad loans in estimating cost functions. According to our estimation analysis, there is a difference in production technology between large‐sized banks and small or medium‐sized banks. While economies of scale are observed for large‐sized banks, no economies of scope and technological progress are observed for any banks. The results of our analysis suggest that, while the current reform policy is basically appropriate, serious problems remain regarding bank consolidation and the lack of market competition.     

New Urban Sociology in Japan: the changing debates

New Urban Sociology began in Europe at the beginning of the 1970s and then spread to the United States. It also influenced urban studies in Japan. This article examines the changing debates that have occurred in New Urban Sociology since its introduction to Japan in the late 1970s. The twenty years since its introduction from the West can be divided into three stages. The first covers the period from 1977 to 1985, when French urban sociology, particularly Manuael Castells’ theory of the state, was highly influential. The second stage, from 1986 to 1992, focused on theories of urban social movements and the concept of global city in a context of urban renewal in Japan’s major cities. The third stage, from 1992 to the present, is characterized by a transformation of New Urban Sociology into a sociological theory of space under globalization that has been heavily influenced by the work of David Harvey. Née en Europe au début des années 1970, la Nouvelle Sociologie urbaine a ensuite atteint les Etats–Unis, mais elle a aussi influé sur les études urbaines au Japon. L’article examine l’évolution des débats qui ont animé la Nouvelle Sociologie urbaine depuis qu’elle y est arrivée d’Occident à la fin des années 1970. Les vingt années qui ont suivi peuvent se décomposer en trois phases. La première va de 1977 à 1985, alors que la sociologie urbaine française, notamment la théorie de l’État de Manuel Castells, faisait autorité. La deuxième, entre 1986 et 1992, s’attache aux théories des mouvements sociaux urbains et au concept de la ville planétaire (global city) parallèlement à une rénovation des grandes villes nippones. La troisième phase, de 1992 à nos jours, se caractérise par une transformation de la Nouvelle Sociologie urbaine en une théorie sociologique de l’espace soumis à la mondialisation, concept largement inspiré des travaux de David Harvey.     

Pure Strategy Nash Equilibrium in a Group Formation Game with Positive Externalities

This paper identifies a domain of payoff functions inno spillovernoncooperative games withPositive externalitywhich admit a pure strategy Nash equilibrium. Since in general a Nash equilibrium may fail to exist, in order to guarantee the existence of an equilibrium, we impose two additional assumptions,AnonymityandOrder preservation. The proof of our main result is carried out by constructing, for a given gameG, a potential function Ψ over the set of strategy profiles in such a way that the maximum of Ψ yields a Nash equilibrium in pure strategies ofG.Journal of Economics LiteratureClassification Numbers: C72, D62, H73.     

Tiebout's tale in spatial economies: Entrepreneurship, self-selection, and efficiency

This paper establishes the existence and efficiency of equilibrium in a local public goods economy with spatial structures by formalizing Hamilton's [Hamilton, B.W., 1975. Zoning and property taxation in a system of local governments Urban Studies 12, 205–211] elaboration of Tiebout's [Tiebout, C., 1956. A pure theory of local public expenditures. Journal of Political Economy 64, 416–424] tale. We use a well-known equilibrium concept from Rothschild and Stiglitz [Rothschild, M., Stiglitz, J.E., 1976. Equilibrium in competitive insurance markets: an essay on the economics of imperfect information. Quarterly Journal of Economics 40, 629–649] in a market with asymmetric information, and show that Hamilton's zoning policy plays an essential role in proving the existence and efficiency of equilibrium. We use an idealized large economy following Ellickson, Grodal, Scotchmer and Zame [Ellickson, B., Grodal, B., Scotchmer, S., Zame, W.R., 1999. Clubs and the market, Econometrica 67, 1185–1217] and Allouch, Conley and Wooders [Allouch, N., Conley, J.P., Wooders, M.H., The Tiebout Hypothesis: On the Existence of Pareto Efficient Competitive Equilibria, (2004), mimeograph]. Our theorem is directly applicable to the existence and efficiency of a discrete spatial approximation of mono- or multi-centric city equilibria in an urban economy with commuting time costs, even if we allow the existence of multiple qualities of (collective) residences, when externalities due to traffic congestion are not present.     

Can Small Class Policy Close the Gap? An Empirical Analysis of Class Size Effects in Japan

Can smaller classes lead to better educational outcomes and greater equality in achievement? We estimate the causal effects of class size on achievement tests by using discontinuous changes in class size under the Japanese public compulsory education system. We employ a value‐added model that uses achievement tests conducted at two different times during the same school year. Our results show that a reduction in class size has significantly positive effects on Japanese language test scores in the sixth grade, especially at schools in wealthy areas. However, we find no evidence that a universal small class policy closes the achievement gap among schools.     

High‐Frequency Contagion of Currency Crises in Asia*

Using daily data from the Asian currency crisis, the present paper examines high‐frequency contagion effects among six Asian countries. The ‘origin’ (of exchange rate depreciation, or decline in stock prices) and the ‘affected’ (currencies, or stock prices) in the daily spillover relationship were defined and identified. Indonesia is found to be the main origin country, affecting exchange rates of other countries. Contrary to conventional wisdom, evidence of high‐frequency crisis spillover from the Thai exchange rate to other currencies was weak at best. There exists a high‐frequency contagion in stock markets among East Asian countries. Contagion coefficients are positively correlated with trade indices, indicating that investors lower their financial assessment of a country that has trade linkage to a crisis origin country within days, if not hours, of a shock.     

Sequential formation of alliances in survival contests

We consider a sequential formation of alliances à la Bloch (1996) and Okada (1996), followed by a two‐stage contest in which alliances first compete with each other, and then the members in the winning alliance compete again for an indivisible prize. In contrast to Konishi and Pan (2019a), which adopted an open‐membership game as the alliance formation process, alliances are allowed to limit their memberships (excludable alliances). We show that if members’ efforts are strongly complementary to each other, there will be exactly two asymmetric alliances: the larger alliance is formed first and then the remaining players form the smaller one. This result contrasts with the one under open membership, where moderate complementarity is necessary to support a two‐alliance structure. It is also in stark contrast with Bloch, Sánchez‐Pagés, and Soubeyran (2006), which shows that a grand coalition is formed in the same game if the prize is divisible and a binding contract can be used to avoid further conflicts after an alliance wins the prize.     

Health Infrastructure, Demographic Transition and Growth

Empirical studies show that the fertility rate (mortality rate) exhibits an inverted u‐shaped dynamic in some countries, while it decreases monotonically in other countries. This paper formulates the concept of public health infrastructure and constructs a growth model that replicates various historically observed patterns of fertility and mortality rates.     

Do commercial sales move coincidentally with business cycles in Japan? a dynamic two-mode regression approach

This paper examines the validity of including wholesale and retail commercial sales in the coincident index of business conditions in Japan. Specifically, we consider the movement of gross domestic product (GDP) as a reference cycle, and investigate whether commercial sales move coincidentally with GDP by applying the dynamic two-mode regression approach. The results show that wholesale commercial sales are not justified as a component of the Japanese coincident index, but that retail commercial sales may be considered a legitimate component of the Japanese coincident index.