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  • Author: Mingxing Liu, Pengfei Zhang, Shiyuan Pan, Justin Yifu Lin
  • Publication Date: 05-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper explores the politically determined development objectives and the intrinsic logic of government intervention policies in east developed countries. It is argued that the distorted institutional structure in China and in many least developed countries, after the Second World War, can be largely explained by government adoption of inappropriate development strategies. Motivated by nation building, most least-developed countries, including the socialist countries, adopted a comparative advantage defying strategy to accelerate the growth of capital-intensive, advanced sectors in their countries. In the paper we also statistically measure the evolution of government development strategies and the economic institutions in China from 1950s to 1980s to show the co-existence and coevolution of government adoption of comparative advantage defying strategy and the trinity system.
  • Topic: Development, Economics, Government
  • Political Geography: China, Asia
  • Author: Justin Yifu Lin, Peilin Liu
  • Publication Date: 04-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper argues that both openness and poverty in a country are endogenously determined by the country's long-term economic development strategy. Development strategies can be broadly divided into two mutually exclusive groups: (i) the comparative advantage-defying (CAD) strategy, which attempts to encourage firms to deviate from the economy's existing comparative advantages in their entry into an industry or choice of technology; and (ii) the comparative advantage-following (CAF) strategy, which attempts to facilitate the firms' entry into an industry or choice of technology according to the economy's existing comparative advantages.
  • Topic: Development, Economics, Poverty
  • Political Geography: China, Asia
  • Author: Guanghua Wan, Yin Zhang
  • Publication Date: 04-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper examines the distributional impact of globalization on the poor in urban China. Employing the kernel density estimation technique, we recovered from irregularly grouped household survey data the income distribution for 29 Chinese provinces for 1988-2001. Panels of the income shares of the poorest 20, 10 and 5 per cent of the urban residents were then compiled. In a fixed-effect model, two of the central conclusions of Dollar and Kraay (2002)—that 'the incomes of the poor rise equi-proportionately with average income' and that trade openness has little distributional effect on poverty—were revisited. Our results lend little support to either of the Dollar-Kraay conclusions, but instead indicate that average income growth is associated with worsening income distribution while globalization in general, and trade openness in particular, raises the income shares of the poor. It is also found that openness to trade and openness to FDI have differential distributional effects. The beneficial effect of trade was not restricted to the coastal provinces only, but also weakened significantly after 1992. These findings are robust to allow for nonlinearity in the effect of globalization and to control for the influence of several other variables.
  • Topic: Economics, Globalization, Poverty
  • Political Geography: China, Asia
  • Author: Brinda Viswanathan, S. Kavi Kumar
  • Publication Date: 04-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: The net impact of globalization on developing countries, and more specifically on the poorer sections of population in these countries, is complex and context dependent, and hence needs to be analysed empirically. This study in the context of globalization attempts to develop regional level indices of vulnerability with respect to welfare loss in India using a methodology based on fuzzy inference systems. The vulnerability of an entity is conceptualized (following the practice in global climate change literature) as a function of its exposure, sensitivity and adaptive capacity. Empirical analysis based on such multidimensional conceptualization demands use of indicator-based approach which is attempted in this study and uses fuzzy models that adequately capture vagueness inherent in such approaches.
  • Topic: Development, Economics, Globalization
  • Political Geography: India, Asia
  • Author: Tony Addison
  • Publication Date: 02-2006
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: Much has changed in international finance in the twenty years since UNU-WIDER was founded. This paper identifies five broad contours of what we might expect in the next twenty years: the flow of capital from ageing societies to the more youthful economies of the South; the growth in the financial services industry in emerging economies and the consequences for their capital flows; the current strength in emerging market debt, and whether this represents a change in fundamentals or merely the effect of low global interest rates; the impact of globalization in goods markets in lowering inflation expectations, and therefore global bond yields; and the implications of the adjustment in global imbalances between Asia (in particular China) and the United States for emerging bond markets as a whole. The paper ends by noting the paradox that today we see ever larger amounts of capital flowing across the globe in search of superior investment returns, and yet the financing needs of the poorer countries are still largely unmet.
  • Topic: Development, Economics, International Trade and Finance
  • Political Geography: United States, China, Asia
  • Author: Guanghua Wan, Yin Zhang
  • Publication Date: 08-2005
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper proposes a semi-parametric method for poverty decomposition, which combines the data-generating procedure of Shorrocks and Wan (2004) with the Shapley value framework of Shorrocks (1999). Compared with the popular method of Datt and Ravallion (1992), our method is more robust to misspecification errors, does not require the predetermination of functional forms, provides better fit to the underlying Lorenz curve and incorporates the residual term in a rigorous way. The method is applied to decomposing variations of urban poverty across the Chinese provinces into three components – contributions by the differences in average nominal income, inequality and poverty line. The results foreground average income as the key determinant of poverty incidence, but also attach importance to the influence of distribution. The regional pattern of the decomposition suggests provincial groupings based not entirely on geographical locations.
  • Topic: Demographics, Economics, Poverty
  • Political Geography: China, Asia
  • Author: Saman Kelegama
  • Publication Date: 08-2005
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: Peace can generate an economic dividend, which can be further increased by appropriate economic reform. This dividend can in turn be used to raise popular support for conflict resolution measures along the road to achieving a final political settlement, a strategy that characterizes the recent period in Sri Lanka. However, despite an increase in economic growth following the cessation of hostilities between the Liberation Tigers of Tamil Eelam (LTTE) and the government, no substantial dividend materialized for either government supporters in the South or LTTE supporters in the war-torn Northeast. The causes of this failure include delays in disbursing aid which would have eased adjustment to economic reforms—resulting in cuts to public spending that affected Southern households—and weak institutions that impeded the effective use of aid in the Northeast. The Sri Lankan experience highlights some important lessons for both government and donors on making use of an economic lever for consolidating a peace process and conflict resolution. It also highlights some of the dangers in relying too much on economic levers to consolidate a peace process when levels of mistrust are very high.
  • Topic: Conflict Resolution, Economics, Peace Studies
  • Political Geography: Asia, Sri Lanka
  • Author: Guanghua Wan, Zhao Chen, Ming Lu
  • Publication Date: 11-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: China's recent accession to the WTO is expected to accelerate its integration into the world economy, which aggravates concerns over the impact of globalization on the already rising inter-region income inequality in China. This paper discusses China's globalization process and estimates an income generating function, incorporating trade and FDI variables. It then applies the newly developed Shapley value decomposition technique to quantify the contributions of globalization, along with other variables, to regional inequality. It is found that (a) globalization constitutes a positive and substantial share to regional inequality and the share rises over time; (b) capital is one of the largest and increasingly important contributor to regional inequality; (c) economic reform characterized by privatization exerts a significant impact on regional inequality; and (d) the relative contributions of education, location, urbanization and dependency ratio to regional inequality have been declining.
  • Topic: Economics, Globalization
  • Political Geography: China, Asia
  • Author: Guanghua Wan, Yin Zhang
  • Publication Date: 08-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: The Chinese economy underwent cyclical fluctuations in growth and inflation in the reform period. Contrasting views exist on the role of money in such fluctuations. This paper assesses these views employing structural VEC models based on the exchange equation. It is found that in the long run money accommodates, rather than causes, changes in output and prices. In the short run, price fluctuations are mostly attributable to shocks that have permanent effects on prices and money but not on real output. These shocks also account for a large proportion of fluctuations in money, and strongly influence the movements of output.
  • Topic: Economics, Emerging Markets, International Trade and Finance
  • Political Geography: China, Asia
  • Author: Guanghua Wan, Yin Zhang
  • Publication Date: 08-2004
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: This paper proposes a structural VAR model which extends the frameworks of Hoffmaister and Roldós (2001) and Prasad (1999). The model is then used to analyse the sources of China's trade balance fluctuations in the period of 1985–2000. Efforts are made to distinguish the forces which underlie the long-run trend in trade balance from those with transitory impacts. The effects of four types of shock are examined—the foreign supply shock, the domestic supply shock, the relative demand shock, and the nominal shock. Among other findings, two emerge as important. First, the movements in China's trade are largely the result of real shocks. Second, the Renminbi is undervalued, yet changes in the exchange rate bear little on the trade balance. Therefore, monetary measures would not suffice to redress China's trade 'imbalance'.
  • Topic: Economics, Emerging Markets, International Trade and Finance
  • Political Geography: China, Asia