The emergence of new Islamic economic and business moralities

This article aims to explore the sources of the observed transformation in the embeddedness of economic, business, and financial practices of Muslim individuals in comparison to premodern period Muslims. It argues that the predomination of instrumental reasoning in modern times, as opposed to substantive morality in everyday practice, is one of the main reasons behind the transformation of embeddedness of Muslim individuals. Instrumental reasoning, being the dominant methodology, leads to diminished submergence in social relations; that is not limited to interpersonal relationships, but further extended to the core religious acts. How such an emergent economic and business morality is reconciled with the Islamic substantive morality is examined. It is argued that “transformation of exception into norm” is the main method used to reconcile instrumental reasoning with Islamic law in fulfilling religious obligations, at least in terms of fulfilling the form and in complying with the necessities of modern life. This has led to the emergence of new economic and business moralities.     

The liability of foreignness reconsidered: New insights from the alternative research context of transforming economies

Institutional theory has been increasingly used to decipher implications of the liability of being a foreign firm. Earlier studies have argued that multinational corporations bear social costs arising from lack of legitimacy and thus need to engage in isomorphism to increase their likelihood of survival. Drawing on insights gained from transforming economies, this study reconsiders the espoused relationships among legitimacy, local isomorphism, and overcoming the liability of foreignness. We argue that idiosyncrasies of transforming economies could engender (1) varying levels of need for gaining legitimacy of local constituents and (2) alternative ways other than local isomorphism for gaining legitimacy from local institutional actors.     

Understanding the institutional challenges and impacts of higher education reforms in Indonesia

ABSTRACT

This paper contributes to the academic literature on policy-making at the global level by empirically showing the nature and institutional challenges of higher education reforms under NPM principles. The authors explain the key strategies adopted by Indonesia’s government and the problems it faced in reforming its higher education system. The overall result was negative. The Indonesian reforms will not bring about meaningful outcomes unless the existing institutions, and the environment in which they operate, are also reformed.     

On the Segregation of Genetically Modified,Conventional and Organic Products in European Agriculture: A Multi‐market Equilibrium Analysis

Evaluating the possible benefits of the introduction of genetically modified (GM) crops must address the issue of consumer resistance as well as the complex regulation that has ensued. In the European Union (EU), this regulation envisions the co‐existence of GM food with conventional and quality‐enhanced products, mandates the labelling and traceability of GM products and allows only a stringent adventitious presence of GM content in other products. All these elements are brought together within a partial equilibrium model of the EU agricultural food sector. The model comprises conventional, GM and organic food. Demand is modelled in a novel fashion, whereby organic and conventional products are treated as horizontally differentiated but GM products are vertically differentiated (weakly inferior) relative to conventional ones. Supply accounts explicitly for the land constraint at the sector level and for the need for additional resources to produce organic food. Model calibration and simulation allow insights into the qualitative and quantitative effects of the large‐scale introduction of GM products in the EU market. We find that the introduction of GM food reduces overall EU welfare, mostly because of the associated need for costly segregation of non‐GM products, but the producers of quality‐enhanced products actually benefit.     

Examining the unintended outcomes of NPM reforms in Indonesia

This paper argues that despite Indonesia’s implementation of public sector reforms, the impact of these reforms has yet to achieve the goal of improving governance and preventing corruption. The obvious place to lay blame would be a lack of state capacity, but this study presents evidence to argue that the legacy of General Suharto’s authoritarian regime and the cultural ecology of Indonesian bureaucracy has compromised the government’s capacity to implement these public sector reforms in a meaningful way.

IMPACT

This paper highlights some fundamental points for public policy-makers using NPM techniques to improve accountability and to counter fraud. First, the cultural context and costs of reforms should be taken into account before implementing new accounting technology. Second, policy-makers should consult academic work on the implementation of new reporting systems and other NPM policies. Finally, the powers of local politicians (for example mayors or district heads) need to be controlled to ensure they do not undermine the role of accounting and auditing for better transparency, governance and corruption eradication.     

Insider trading with product differentiation

This paper investigates the effect of product differentiation on the real and financial decisions of a publicly-owned firm, competing $\grave{a}$ la Cournot with another privately-owned firm. The results show that the degree of product differentiation affects the stock price coefficients (i.e. the market maker’s response to the real signal and to the total order flow signal) and the output of the publicly-owned firm. It also appears to have a detrimental effect on the manager’s profits and compensation scheme. The paper then proposes an extension of the benchmark model to incorporate Cournot and Stackelberg competition between two insiders in the financial market. The type of the financial competition adopted has also an effect on the results of the benchmark model that sometimes depend on the degree of product differentiation.     

Incomplete integration and contagion of debt distress in economic unions

This paper compares different fiscal integration schemes on the basis of their ability to finance public investments and resilience to debt distress and contagion. Complete integration schemes, where a central authority chooses the level of public investments with productivity‐enhancing externalities across different jurisdictions, are shown to be superior to incomplete integration schemes, where member governments choose public investments unilaterally. As a result, equilibrium income is greater for citizens of both member states under a complete integration scheme. Moreover, complete integration schemes are shown to be more resilient to idiosyncratic shocks and more effective in limiting contagion of debt distress. This is mainly because the central authority can credibly borrow more without risking default than member states taken together can and it can “transfer resilience” across them if needed. These findings inform discussions on structural aspects of secular stagnation in Europe by emphasizing a potential challenge in the institutional design of fiscal responsibilities.     

Implementation and challenges of introducing NPM and accrual accounting in Indonesian local government

This article provides insights into the implementation of New Public Management (NPM) practices in Indonesia, including the introduction of an accrual accounting system for local government. The adoption of NPM practices was part of political, economic and public sector reforms introduced after 1998. The article discusses the background and obstacles to the reforms and the nature of the accrual accounting system adopted by Indonesian local government.

Finally, the authors make recommendations for policy-makers in Indonesia and other developing nations.     

OBSTACLES TO PUBLIC SECTOR ACCOUNTING REFORM IN INDONESIA

This paper draws attention to the importance of improving the quality of public sector accounting in Indonesia, in line with the aims of reformasi (reform) and demokratisasi (democratisation), and in the context of decentralisation. It highlights a continuing lack of progress in reform of government accounting. This is attributable partly to a lack of interest in and understanding of the issues among newly empowered electors. Successive governments have been reluctant to push hard for accounting reform, not least because improved accountability poses a significant threat to politicians’ and bureaucrats’ overall income levels. In addition, current human resource management practices in the public sector have resulted in a shortage of accounting skills, and without these there is little prospect of successful reform in this area. A possible solution may be to establish a parallel civil service specifically to undertake the accounting functions of government.     

The Inherited Inequality: How Demographic Aging and Pension Reforms can Change the Intergenerational Transmission of Wealth

The role of inherited wealth in modern economies has increasingly come under scrutiny. This study presents one of the first attempts to shed light on how demographic aging could shape this role. It shows that, in the absence of retirement annuities, or for a given level of annuitization, both increasing longevity and decreasing fertility should reduce the inherited share of total wealth in a given economy. Thus, aging is not likely to explain a recent surge in this share in some advanced economies. Shrinking retirement annuities, however, could offset and potentially reverse these effects. The paper also shows that individual bequests will be more unequally distributed if aging is driven by a drop in fertility. In comparison, the effect of increasing longevity on their distribution is non‐monotonic.