Non-parametric methods in demand analysis

This note describes techniques developed by Afriat, Diewert, Varian, and others that allow empirical investigation of consumer demand data without imposing any maintained hypotheses concerning the parametric form of the underlying demand or utility functions.     

Survey of Recent Developments

Following the remarkably successful 2014 parliamentary and presidential elections in Indonesia, attention now turns to the new president and his agenda for the next five years. President Joko Widodo, known as Jokowi, has emphasised the importance of strong economic growth and rising living standards. But he faces significant, broad-ranging economic challenges and, perhaps not surprisingly, serious discussion of these issues did not feature during the election campaigns. In many respects the economy is at a crossroads, facing the choice between a business-asusual scenario of no reform and consequently sluggish economic growth, and a politically difficult reform agenda that would set it on a higher growth path. Economic policymakers regard the events of 2013 as a mini economic crisis, and they feel vindicated in their explicit preference for stability over growth—that is, for slowing the economy through tighter fiscal and monetary policy and letting the currency decline. For now, the economy is slowing but holding up quite well, especially by comparative international norms and considering foreign and domestic headwinds, including possible macroeconomic and financial fragilities. Here we examine these headwinds—from global economic volatility and declining commodity prices, particularly in the wake of the so-called Bernanke shock of May 2013, to the continuing policy drift at home. We investigate whether there is evidence of an emerging adjustment from the commodity-driven growth of the past decade to some of the traditional tradables sectors, especially manufacturing. While the commodity boom is almost certainly a thing of the past—at least at levels witnessed since 2005—the country's political narratives and the government's microeconomic policies appear to be still premised on an era of plenty funded by a disappearing boom. We speculate on likely options and directions for what in all likelihood will be a ‘Jokowi decade’.     

Indonesia's Industrial Transformation 1 Part I

It is now possible to obtain a fairly complete picture of Indonesian industril development, based on the 1986 Economic Census and subsequent Updates, the mcorporation of the huge oil and gas sector, and die earlier industrial data base. The picture is one of dramatic growth and transformation since the late 1960s when Indonesia was one of the least industrialised countries for its size. In this paper we examine the pattern and changing structure of industry, focusing on industry composition, regional industrialisation, ownership, scale and wages. Indonesia's industrial transformation is evident not only in rapid Output and employment growth, but also in the transition to more capital and skill-intensive industries, a narrowing in the earlier very large (almost ‘dualistic’) productivity differentials, strong productivity and wage growth, a broadening of the industrial base outside Java, and a probable reduction in concentration levels (at least by establishment).     

Vertical Foreclosure in Broadband Access?

The merger of AOL and Time Warner involved a vertical combination of the largest Internet content provider and aggregator and a large cable system operator which offers a conduit through which broadband customers can access Internet content at high speeds. We consider the economic incentives of such a firm to engage in two distinct vertical foreclosure strategies: (1) conduit discrimination—insulating its own conduit from competition by limiting rival platform distribution of its affiliated content and services, and (2) content discrimination—insulating its own affiliated content from competition by blocking or degrading the quality of outside content.     

Economics at Google

Business Economics - What does an economist do at Google? I get this question a lot so I thought this would be a good opportunity to answer it, using illustrations from pricing in ad auctions, the...     

The political economy of manufacturing protection in LDCs: An Indonesian case study

Abstract

There are significant inter‐industry variations in protection in all but the most open of economies. This invites the obvious question, why? Are these variations simply random in nature, or are they systematic, and therefore amenable to explanation? Most of the literature on this subject pertains to industrialized economies. Few studies have been undertaken of developing countries, where political institutions are less developed, policy‐making processes often less transparent, protection generally higher and more dispersed and the data base usually poorer. In this paper, we examine these issues with reference to Indonesia, a large, rapidly industrializing economy with high (albeit decreasing) levels of manufacturing protection. We find that the standard theory purporting to explain inter‐industry variations in protection performs quite well in some cases, although a substantial unexplained residual exists. We give examples of how the theory developed for industrialized economies might be modified for developing economies.