REFORM CREATING REGIONAL TRADE AGREEMENTS AND FOREIGN DIRECT INVESTMENT: APPLICATIONS FOR EAST ASIA

Abstract. We estimate the investment creation and diversion effects of RTAs by using an extended gravity equation focusing on domestic reform as a commitment device for RTA membership. As a case study, we estimate the impact of proposed East Asian RTAs on inward FDI. We find that: (i) reform creating RTA membership, larger market size, better skilled labour and lower trade costs all contribute positively and significantly to inward FDI; and (ii) most of the proposed East Asian RTAs promote intra‐bloc FDI. In particular, both South–North and North–North RTAs prove to be more preferable membership combinations to South–South RTAs in East Asia.     

Preference densities and social choices

We discuss a ranking method that allows social pairwise rankings of alternatives to depend on more than just individuals’ pairwise rankings. This violates Arrow’s Independence of Irrelevant Alternatives, but allows Borda’s rank-order counting, which provides a limited accounting for individual preference intensities. We capture Arrow’s rules (i.e., with IIA) and Borda’s method as two polar cases, and allow cases in between. Our main result provides the critical line dividing those degrees of intensity, or preference density, that yield positive results from those that yield negative results. We thank two referees for helpful comments.     

Financial Crisis and Intertemporal Linkages Across the ASEAN-5 Stock Markets

The stock indices of five ASEAN countries, namely, Singapore, Malaysia, Indonesia, Thailand and the Philippines have experienced a structural change after mid-1997 due to the Asian financial crisis, and another shift slightly more than a year later when the markets rebounded. Contemporaneous correlation in stock returns is the strongest and Indonesia leads the movements of the other indices during the crisis. The relative influence of foreign shocks is much more felt during the crisis, as seen in the stronger and longer horizon of responses of all the markets. The stock indices are cointegrated before, but not during the crisis. Price feedbacks between the larger markets of Singapore, Malaysia and Indonesia that existed before the crisis disappear once the crisis is over. Short-run linkages of Malaysia with the other markets have weakened after the crisis. With an increase in the degree of exogeneity of its stock market, contemporaneous co-movements with the other markets have reduced and the causal relationships no longer exist.JEL Classification: G15, F30An earlier draft of this paper was presented at the 11th Annual Conference on Pacific Basin Finance, Economics & Accounting held in Taipei. This paper benefited from the discussions at the conference. We are grateful to two anonymous referees for helpful comments and suggestions which led to further improvement of the paper.     

Dwelling Age,Redevelopment, and Housing Prices: The Case of Apartment Complexes in Seoul

The aging of a housing structure not only leads to depreciation but also increases the possibility of redevelopment. If redevelopment accompanies an increase in structural density in order to accommodate the increased demand for housing, it provides large capital gains to the existing owners. In this case, expectations of redevelopment in the near future and the eventual announcement of redevelopment plans can have a strong positive impact on the current price of housing. We test this hypothesis using a hedonic pricing model designed to decompose the age effects into depreciation effect and redevelopment effect. Based on 3,474 observations on apartments in Seoul in 2001, estimation results confirm our hypothesis. While the depreciation effect dominates the redevelopment effect until 15 to 19 years of age, depending on the specification, the redevelopment effect eventually dominates the depreciation effect thereafter, causing the apartment price to increase. At 27 years of age, the apartment price decreases by as much as 4553 percent of the initial value, due to depreciation. However, the redevelopment effect increases the price by as much as 2832 percent, driving the price up to 7687 percent of the original value.     

Effects of workplace bullying on work engagement and health: the mediating role of job insecurity

This study examined the effects of exposure to workplace bullying on work engagement and health problems. It is one of the few studies to treat job insecurity as an explanatory factor of the bullying–outcome relationship. Specifically, we perceive that job insecurity unfolds through an interpersonal process in which negative experiences, such as bullying, make employees feel less valuable in their workplace. By analyzing the data from employees in Korea using the latent factor approach, the tested mediation model explained that exposure to workplace bullying decreased the work engagement of employees and increased their health problems because of their high level of perceived job insecurity. The relationship between bullying and engagement would not be established without the job insecurity variable, thereby suggesting its indirect effect. Given the partial mediating effect of health problems, job insecurity is identified as an additional underlying mechanism that explains why bullying increases health problems. This finding does not contradict the widespread arguments on the health-impairing effect of workplace bullying. This study contributes to the literature and business practices by identifying an important underlying mechanism that helps us understand the association between exposure to workplace bullying and key work outcomes.     

Alternative indicators for predicting the probability of declining inflation: evidence from the US

The performance of inflation indicators for predicting the probabilityof inflation falling inside constant and moving targets is consideredwith a probit model using US data. Given the Federal ReserveSystem's emphasis on achieving price stability, particular attentionis given to the target that future inflation will be below recentinflation. In contrast with earlier years, the unemploymentand capacity utilisation rates do not perform well in forecastingthe direction of inflation in the mid and late 1990s. We suggestthat extending the Keynesian Phillips curve analysis to considerchanges in labour market conditions, technological advance andworker skills, and openness will increase understanding of theseissues.     

Linkages between industry and services and their implications for urban employment generation in developing countries

The paper examines the nature and extent of linkages between industry and services, using an international input-output table for the Pacific Basin countries. Empirical evidence seems to suggest that the manufacturing sector contributes to urban employment creation in developing countries more through its interindustry and intersectoral linkages, as well as its income-induced demand for various types of services, than through its direct employment effects.     

Weighted and quadratic models of choice under uncertainty

This paper extends the weighted and quadratic utility models of choice under risk to the context of choice under uncertainty. An important characteristic of the models is that they admit ‘dynamically consistent’ updating rules.     

Population Genetics and Economic Growth

This paper builds an age-structured model of human population genetics in which explicit individual choices drive the dynamics via sexual selection. In the model, agents are endowed with a high-dimensional genome that determines their cognitive and physical characteristics. Young adults optimally search for a marriage partner, work for firms, consume goods, save for old age and, if married, decide how many children to have. In accord with the fundamental genetic operators, children receive genes from their parents. An agent's human capital (productivity) is an aggregate of the received genetic endowment and environmental influences so that the population of agents and the economy co-evolve. After calibrating the model, we examine the impact of physical, social, and economic institutions on population growth and economic performance. We find that institutional factors significantly impact economic performance by affecting marriage, family size, and the intergenerational transmission of genes. The principal novel findings are that i) genetic diversity has a nonmonotone causal impact on population size and economic performance; ii) an endogenous population threshold exists which, absent frictions, causes societies with declining populations and output to reverse course and grow; and iii) that the emotion love substantially accelerates economic growth by increasing genetic diversity just enough, which we term The Goldilocks Principle.