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The Developing Economies

Volume 39, Number 3 (September 2001)

The Developing Economies ■ The Developing Economies Volume 39, Number 3 (September 2001)
■ B5
■ 105pp.
■ Published in September 2001
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Yun-Peng Chu, "Equalization Effects of the Expansion of Labor-Intensive Exports: The Case of Taiwan," pp. 235-66.

The periods of declining inequality in fast-growing Asian economies including Japan, Hong Kong, Singapore, Taiwan, Korea, and Malaysia coincided with the periods of rapid expansion of labor-intensive exports and the accompanying rise in employment. An investigation of the specific case of Taiwan in the postwar era further revealed that for both 1966 and 1976, wage disparities could be largely accounted for by the different premiums attached to skills, which reflected the individual characteristics of workers. Between 1966 and 1976, narrowing disparities in the premiums attached to different education levels account for the largest part of the changes in wage inequality. It was found that this phenomenon was mainly due to the rapid expansion of employment by the export-oriented, unskilled-labor-intensive industries that exhausted surplus labor. The findings of the Taiwan case suggest the possibility of the absence of trade-off between low-skilled-labor-intensive industrialization and decreasing income inequality.

Steven R. Tabor and M. Husein Sawit, "Social Protection via Rice: The OPK Rice Subsidy Program in Indonesia, " pp. 267-94.

In the wake of the El Nino drought and during the first year of the monetary crisis, the Indonesian authorities launched a special market operation (OPK) program. Under OPK, poor families were provided access to twenty kilograms of rice each month at a subsidized price. The program was quickly scaled up to reach nearly a quarter of the population. This article assesses the cost-effectiveness of OPK and compares its benefits and costs using data from the first year of program operations. Costs include direct financial outlays and the shadow cost of labor and administratively priced inputs. Benefits include income transfer, indirect multiplier, employment, and nutritional effects. The results show that OPK transfers did convey significant economic and nutritional benefits to program recipients at a modest administrative cost, although some of the benefits were captured by non-target, food secure groups.

Thomas Hartmann-Wendels and Lukas Menkhoff, "Could Tighter Prudential Regulation Have Saved Thailand's Banks?" pp. 295-326.

The improvement of prudential regulation in the crisis-ridden Asian countries is suggested by international organizations as a major lesson to be implemented. The effect from tighter regulation can be estimated by simulating the crisis with new rules. The analysis for Thailand's commercial banks shows that more effective prudential regulation could have lowered the impact from credit risks to some degree. More important for the financial meltdown were, however, certain macroeconomic risks. These are not covered by any existing regulatory arrangements. Consequently, even many tightly regulated German banks would not survive a macroeconomic shock as happened in Thailand.