IDE Research Columns
Economic Resilience and Changes in Global Production Structure
Published on 11/17/22
When countries face adverse economic shocks, economic agencies (i.e., firms and governments) are expected to mitigate the negative impact. This study (Hashiguchi et al. 2021) examines how countries’ production and demand patterns change when tackling shocks, arguing that the answer depends on their resilience to economic shocks. This study uses the Organisation for Economic Co-operation and Development’s annual Inter-Country Input–Output tables from 1995 to 2011 to investigate how country-level final demand shocks relate to production and demand patterns changes. We found that, during the 2009 global economic crisis triggered by the burst of the US housing bubble, countries were more resilient to negative shocks if they could prop up the economy through the domestic service sectors instead of domestic goods and foreign sectors. The substitutability between goods and service sectors and domestic and foreign sectors is essential for understanding the potential risk to a country’s domestic economy from shocks abroad, including economic, environmental, health-related, or political.
Does Minimum Wage Hike Decrease Employment in Developing Countries? Evidence from Indonesia
Published on 11/15/22
More than a hundred countries have implemented a minimum wage. In developed countries, proponents and opponents of the policy have debated the issue of the minimum wage's effect on employment using a large amount of evidence and high-quality data. However, we do not have much evidence for developing countries. After reviewing the issue's background, we will examine a recent study in Indonesia that used longitudinal manufacturing firm data from 1994 to 2015. The study finds a negative effect of minimum wage increases on employment in the formal sector by comparing manufacturing firms with higher minimum wages after unexpected decentralization in 2001 to firms with lower ones.
Dowry and Women’s Empowerment: Why does the Practice Remain in South Asia?
Published on 10/24/22
Dowry is the transfer of cash, jewelry, and other valuable assets from the bride’s family to the groom’s family at the time of marriage. Dowry is prohibited in India and Bangladesh and restricted in Pakistan. However, these legal measures are not effective; in fact, the practice of dowry is widespread in South Asian countries. It is my argument that people are incentivized to continue observing the seemingly gender-discriminatory practice of dowry, despite its illegality. Simply banning dowry may lead to unexpected negative effects on women’s welfare. Dowry will likely only disappear when it is viewed as unnecessary. Women’s empowerment, specifically through participation in paid-work and guarantees of property rights, may be the key to discouraging the practice.
Ideological Consolidation? The Predominant Party System in Turkey
Published on 10/24/22
Predominant party systems (PPSs) are quite common, but relatively little attention has been paid to this type of democracy. Nearly half of consolidated democracies have had a predominant party system (Nwokora and Pelizzo 2014). To consolidate a PPS, some political theories assume that an incumbent party will attempt to anchor voting behavior by ideological polarization. However, does this strategy actually work? In Turkey, the incumbent Justice and Development Party (Adalet ve Kalkınma Partisi: AKP) government led by Recep Tayyip Erdogan has campaigned with a focus on conservatives and nationalist voters. My analysis of the 2018 post-election survey reveals that the ideological polarization strategy was successful with conservatives, but not with nationalists (Hazama 2021). While conservatives who supported the incumbent party replicated their support, nationalists were less likely than other groups to repeat their support for the incumbent. Nationalists tended to punish the incumbent party more severely than conservatives for its poor economic performance.
What Makes One’s Job Interesting? A Cross-Country Comparison
Published on 09/28/22
Individuals who believe that their job is interesting work harder, have greater job satisfaction, and are less likely to quit their job. Job interestingness, i.e., how much one finds his/her job interesting, is expected to enhance voluntary learning in the workplace. Despite the importance of job interestingness, empirical studies on its determinants are scarce. This article explores this issue and indicates that the key determinants of job interestingness vary between countries or country groups in terms of their weight. A good relationship with management and colleagues is a very important determinant in Japan, whereas job autonomy is more significant in other high-income countries. A job’s economic meaning has much more influence in middle- and low-income countries. These results imply that the effective ways to make a job interesting are likely to differ across cultures, work organizations, and developmental stages.
How Will the US-China Trade War Affect Asian Economies?
Published on 09/09/22
The Geographical Simulation Model of the Institute of Developing Economies (IDE-GSM) estimates the following economic impact of the US-China trade war: −0.4% (of GDP) for the US, −0.5% for China, and +0.1% for East Asia (excluding China). Moreover, the electronics and electrical machinery sectors in both the US and China will suffer significantly. By contrast, the electronics and electrical machinery sectors in East Asia could benefit from this trade war. Although the US-China trade war benefits East Asian countries, for the time being, they are more vulnerable to US tariff increases than China, and it would be preferable to bring the US back into multilateral trade negotiations in a concerted effort.
Growth of the Fresh Fruit and Vegetable Export Industry in Developing Countries: The Case of Peru
Published on 08/17/22
Peru is an emerging international exporter of fresh fruits and vegetables (FFVs), with exports expanding rapidly in the past two decades. FFVs are primary products that have little value-added. However, delivering high-quality FFVs to the market at the right moment can add value to these products. Creating value chains to accommodate demand was key to industrial development based on the export of primary products. Counter-season production is necessary but not sufficient for Peruvian FFV exporters to be competitive. Individual efforts of Peruvian agribusiness companies combined with their collective actions to build the country’s solid phytosanitary capacity have made the country one of the world's emerging FFV exporters.
E-Commerce Provisions in the Regional Comprehensive Economic Partnership: A Milestone for a Global Rule?
Published on 08/02/22
The development of information technology has enabled the digitalization of economic activity worldwide, and the recent COVID-19 pandemic has boosted this trend. Consequently, it becomes increasingly important to establish widely accepted international rules on e-commerce. This article discusses how the Regional Comprehensive Economic Partnership agreement was reached among diverse member countries and draws implications for the ongoing competition for a global rule on e-commerce.
Increasing International Trade of Secondhand Goods and its Impacts on Developing Countries
Published on 07/14/22
Increases in the international trade of secondhand goods are attributable to the mainstreaming free trade regime since the early 1990s and advancements in technology, especially the development and diffusion of Information and Communication Technologies (ICT). The international trade of secondhand goods for reuse has the potential to conserve natural resources. However, many developing countries have prohibited the import of secondhand goods because of the possible negative impacts on the environment, such as recycling of nonreusable parts without pollution control, and on industrial development.
Friend or Foe? Global and Local Sustainability Standards in the Palm Oil Sector
Published on 07/05/22
Sustainability standard schemes have been used globally to promote sustainable agricultural consumption and production for more than decades. Nongovernment organizations in Europe and the United States have created these globally recognized standards driven by the need for sustainable consumption. Furthermore, both public and private sectors in various countries have subsequently introduced local standards enhancing sustainable production. Consequently, growers, firms, and consumers have choices among multiple standards with different characteristics. Is the proliferation of standards beneficial or harmful to enhance sustainability? Previous studies do not fully address the roles of local standards. This study investigated the case of palm oil sustainability standards through a focus on a global standard and the counterpart local standards. Complementary roles of global and local standards depending on the market and producers are shown.
How to Govern the Quality of Fertilizer: Lessons from Vietnam
Published on 06/24/22
The governance of fertilizer quality is important to food policy because the prevalence of low-quality fertilizers discourages fertilizer use and stagnates agricultural productivity growth. This column discusses the current condition of fertilizer quality and describes the initiatives taken against the problem in Vietnam. We report that average fertilizer quality is fair, and farmers expressed no concerns over fertilizer quality—contrasting what has been reported for sub-Saharan Africa. Vietnam’s fertilizer market is governed by three initiatives: government regulations and controls through licensing, mandatory quality labeling, and random inspections; producers’ effort to maintain quality and brand through warranty and dealer certifications; and hierarchical social learning through which a farmer’s quality assessments about fertilizer quality are aggregated to retailers who then update product assortments on the basis of reputations. The importance of public regulations is highlighted through a discussion on how government and market initiatives interact and complement each other.
Does an Employment Boom Discourage Schooling? Evidence from Vietnam’s Grade 10 Entrance Exam
Published on 06/20/22
As developing countries join the global value chain, rising incomes make it easier for households to send children to school. However, rapid blue-collar job growth also reduces incentives for students to remain in school after reaching working age. In a new paper using data on children’s participation in the exam governing admission to upper-secondary schooling in Vietnam, we find that a more active labor market reduces propensity to continue schooling after Grade 9. The data come from some of Vietnam’s poorer and more remote provinces and so illuminate the challenges of educational development outside of major cities.
Discriminatory Cultural Practices and Female Empowerment: Does Legal Prohibition Lead to a Better Life for Women?
Published on 06/08/22
Legal prohibition is considered an indispensable first step for eradicating discriminatory cultural practices against women. However, game-theoretical analysis of the cultural practice of levirate marriage indicates that criminalizing it may in fact reduce quality of life among women. Levirate marriage stipulates widows should marry the male relative of their deceased husband; otherwise, deceased husband’s extended family would expel them. Therefore, when legally prohibiting discriminatory cultural practices, it is important to deliberate upon why those practices exist and whether criminalizing them would indeed improve women’s lives, given the existing legal, social, and cultural contexts. Other complementary policies should also be implemented to mitigate the possible negative consequences of legal prohibition.
The US-China Trade War and Prospects for ASEAN Economies
Published on 05/17/22
As the Biden administration enters its second year, frictions between the US and China show no sign of abating and may even deteriorate further. Prospects for restoration of pre-trade war economic relations between the world’s two largest economies remain dim. Other Asia-Pacific economies are involuntarily affected by the policies of their largest trading partners. This note provides context by summarizing relevant aspects of the US-China conflict, and explores short and long run implications for trading partners with particular focus on spillovers to ASEAN economies.
Why Is Quality Education Crucial to Industrialization in a Post-pandemic World?
Published on 04/26/22
The COVID-19 pandemic has caused serious disruptions in education, potentially complicating industrialization, a long-standing challenge for developing countries. This column presents the risk of industrialization stagnation in developing countries due to poor education systems and the consequent low social mobility. Manufacturing automation, which may be accelerated further as a result of the pandemic, can assist developing countries in industrial upgrading. However, poor education systems limit the supply of labor with appropriate skills and make the welfare effect ambiguous, thereby widening the wage gap between skilled and unskilled labor. The growing fiscal burden caused by the COVID-19 crisis may leave small policy room, but improving education systems should be prioritized.
The Need for an Integrated Approach to Foreign Direct Investment and Global Value Chains
Published on 04/22/22
I believe that nothing is more problematic than empirical studies of the impact of FDI on the development of local industries in developing countries. Although the issue is of utmost practical importance, there are at least two major defects in most existing studies. As discussed by Murakami and Otsuka (2020), those studies statistically analyze the productivity effects of FDI on local firms. Researchers commonly assume, without testing, that the presence of foreign firms enhances the productivity of local firms, because of the spillover effect of the advanced knowledge of production from foreign firms. The spillover effect is the external effect, which is assumed to affect the level of productivity without conscious transaction of knowledge. Visual inspections of improved products manufactured by foreign firms, learning by reverse engineering of such products, and stealing ideas by poaching workers from foreign firms are examples of the spillover effects. The following questions arise: (1) Does the common statistical analysis make sense? and (2) Is the spillover effect really important?
Context Matters in Making a Program Effective in Preventing Child Marriage and Pregnancy
Published on 03/25/22
Currently, one out of five women ages 20-24 has experienced child marriage globally. Child marriage is a phenomenon mostly found in Sub-Saharan African and South Asian countries: 28% and 34% of women ages 20–24 are married below the age of 18 in Sub-Saharan African and South Asian countries, respectively (UNICEF 2021). Child marriage is believed to have a detrimental impact on girls, such as depriving them of educational opportunities and making them vulnerable to intimate partner violence (Jensen and Thornton 2003; Field and Ambrus 2008). Child marriage is closely related to early pregnancy, which often causes severe health problems for mothers and babies (Barua and Kurz 2001). Due to these alleged detrimental effects, global efforts have been made to eliminate child marriage. Typically, many countries legally ban child marriage, but these legal measures are known to be ineffective.
How Did the COVID-19 Pandemic Change Trade and Investment?
Published on 03/25/22
The coronavirus disease (COVID-19) has spread worldwide since 2020. Although the global economy has suffered from various types of negative shocks, such as financial crises or natural disasters, one of the most distinctive features of the COVID-19 pandemic is the forced adoption of infection prevention measures, such as lockdown and social distancing.
Data Out of the Blue: Using Remote Sensing Data in Economics
Published on 03/25/22
As of January 5, 2022, 12,480 satellites had been put into orbit, out of which 7,840 are still in space, and 5,000 are active.i About 63% of active satellites are for communication, 25% for earth and space science (e.g., weather), 9% for research, and 3% for navigation. Since the 1990s, the number of newly launched satellites has grown, but it jumped to more than 1,000 in 2000 and 2021, most of which belong to the USA (Figure 1). The Global Positioning System (GPS), which comprises about 30 satellites in orbit, is an indispensable part of the global IT business and almost any other business that claims to be smart. Authorities in the EU have started using satellites to monitor crop production and to check the validity of farmers' applications for subsidies.
Making Global Value Chains Visible: A Smile Curve Analysis of the US–China Trade Conflicts
Published on 03/25/22
Given the rapid development of GVCs over the past three decades, the “made in” label, which is typical of manufactured goods, attributing them to a specific economy, has become an archaic symbol of a bygone era, as most manufactured goods are now “Made in the World” (Antràs and Chor 2021).