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1. Assessing South Korea's Role in Promoting ESG Investing in the Asia-Pacific

Author:
William Grimes and Yaechan Lee
Publication Date:
06-2021
Content Type:
Working Paper
Institution:
Korea Economic Institute of America (KEI)
Abstract:
This paper assesses the potential for South Korea to be a regional leader in advancing environmental, social, and governance (ESG) investing, and supporting sustainable development in the Asia-Pacific region. Many economies in the Asia-Pacific region are facing threats from climate change or other environmental limits to growth. Thus, the expansion of ESG investment and green infrastructure is a major regional challenge that must be addressed for sustainable growth. We argue that Korea can play a central role in overcoming this challenge based on the following conjectures. First, Korea’s developmental legacy has allowed it to reshape its financial market and investment habits to quickly expand its ESG market. This model is more relatable to developing economy governments than those offered by Western economies. Sharing Korea’s experience and know-how with the region’s developing economies can augment their ESG compliance capacities and make them a more attractive destination for sustainable infrastructure investments. Second, Korea’s significant presence in the region as a major creditor and exporter can induce ESG adherence from the private sector as Korean investors enhance their commitment to ESG principles. While questions remain about the sustainability of Korea’s ESG adherence due to the market’s heavy reliance on government agency finance and ad hoc pandemic response investments, the increasing global interest in the ESG market makes it likely that the Korean government will continue to incentivize adherence to ESG principles.
Topic:
Economics, Markets, Investment, and Regional Economy
Political Geography:
Asia and South Korea

2. Melons as Lemons: Asymmetric Information, Consumer Learning and Seller Reputation

Author:
Jie Bai
Publication Date:
03-2021
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
There is often a lack of reliable quality provision in many markets in developing countries and firms generally lack a reputation for quality. One potential explanation is that mistrust due to past bad behavior can make reputation-building difficult. I examine this hypothesis in a setting that features typical market conditions in developing countries: the retail watermelon markets in a major Chinese city. I first demonstrate empirically that there is substantial asymmetric information between sellers and buyers on quality and a stark absence of quality premium at baseline. I then randomly introduce one of two branding technologies into 40 out of 60 markets–one sticker label that is widely used and counterfeited and one novel expensive laser-cut label. The experiment findings show that laser-branding induced sellers to provide higher quality and led to higher sales profits. However, after the intervention was withdrawn, all markets reverted back to baseline. I incorporate the experimental variation into an empirical model of consumer learning and seller reputation building. The results suggest that consumers are hesitant to upgrade their perception under stickers, which makes reputation-building a low-return investment. While the new technology enhances learning, the resulting increase in profits is not sufficient to cover the fixed cost of the technology for small individual sellers. Counterfactual analysis shows that information friction and fragmented market lead to significant under-provision of quality.
Topic:
Economics, Markets, and Developing World
Political Geography:
China, Asia, and Global Focus

3. The (Im-)Possibility of Rational Socialism: Mises in China’s Market Reform Debate

Author:
Isabella Weber
Publication Date:
10-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Investigate the long first decade of reform in China (1978-1992) to show that Mises, in particular his initiating contribution to the Socialist Calculation Debate, became relevant to the reconfiguration of China’s political economy when the reformers gave up on the late Maoist primacy of continuous revolution and adhered instead to an imperative of development and catching up. During the Cultural Revolution, Mao had rejected the notions of efficiency and rational economic management. In the late 1970s, the reformers under Deng Xiaoping’s leadership elevated these notions to highest principle. As a result, Mises’ critique that socialism could not achieve a rational economic order came to be debated throughout the 1980s and Chinese economists developed their own reading of Mises and the Socialist Calculation Debate. When Deng Xiaoping reinstated market reforms in the early 1990s after the Tiananmen crackdown, a history of thought review of the possibility of rational socialism and socialist markets helped to justify the Socialist Market Economy with Chinese Characteristics the official designation of China’s economic system to this day.
Topic:
Markets, History, Reform, Economy, and Socialism
Political Geography:
China and Asia

4. Regulated Market, Trapped Workers: The Impacts of the "Tolerant and Prudent" Policy on Labour Precarity in China’s Online Ridehailing Sector

Author:
Wei Zhang, Hao Qi, and Zhongjin Li
Publication Date:
11-2021
Content Type:
Working Paper
Institution:
Political Economy Research Institute (PERI), University of Massachusetts Amherst
Abstract:
Since 2017, China has adopted the "tolerant and prudent" policy in regulating emerging digital platform industries. The impacts of this policy on labour precarity have been rarely studied. Drawing on an original survey of over 600 ridehailing drivers in two Chinese cities, Nanjing and Beijing, we conduct a political economy analysis for a three-party framework involving the municipal government, capital, and labour. We find that, in accordance with the "tolerant and prudent" principle, municipal governments stipulated regulations regarding the qualifications of ridehailing vehicles and drivers. These regulations, although they can help reduce labour precarity in the marketplace for licensed drivers, have exacerbated precarity in the workplace. Specifically, in response to the regulations, the ridehailing platforms aligned with thirdparty rental companies that provided licensed vehicles. This arrangement has effectively trapped many ridehailing drivers in the industry: our quantitative analysis shows that drivers bounded by a rental or rent-toown agreement worked significantly longer hours than counterparts who steered their own vehicles.
Topic:
Markets, Labor Issues, Regulation, Digital Economy, and Precarity
Political Geography:
China and Asia

5. Scaling up Private Investment in Low-Carbon Energy Systems through Regional Cooperation: Market-Based Trade Policy Measures

Author:
Kaliappa Kalirajan, Huong Thi Thu Tran, and Yochang Liu
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study aims to analyse the possibility and challenges of encouraging private sector investment in low-carbon energy systems in Asia, particularly across the Regional Comprehensive Economic Partnership (RCEP) member countries, and to suggest an effective policy framework that governments could apply to improve the development and dissemination of low-carbon energy goods and technologies. The research questions examined in this study are: What type of policy measures affect trade in low-carbon energy systems transition, particularly the renewable energy transition? How can investment signals and incentives be reframed to scale up private finance in renewable energy through regional cooperation? The objective is to investigate and provide several market-based feasible trade policy and investment policy tools for both national and regional markets that governments could adopt to accelerate the speed of private financing of the low-carbon energy industry, particularly the renewable energy industry.
Topic:
Energy Policy, Markets, Trade, and Renewable Energy
Political Geography:
South Asia, East Asia, Asia, and Southeast Asia

6. Does Home (Output) Import Tariff Reduction Increase Home Exports? Evidence from Korean Manufacturing Plant–Product Data

Author:
Chin Hee Hahn and Ju Hyun Pyun
Publication Date:
02-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study examines the effects of domestic output import tariff reduction on domestic plant export dynamics and clarifies the underlying mechanism, using rich plant–product data from the Republic of Korea for 1991–2002. We find that home import liberalisation increases domestic plants’ export market participation (extensive margins), particularly for industry where markup growth is more negative during tariff reductions. However, we do not find evidence that cutting import tariffs significantly affects incumbent home exporters’ export volume (intensive margins). This study unveils a new mechanism – ‘escape competition’ to foreign markets – by showing that reducing import tariffs leads domestic firms under heightened industry competition to look for an opportunity in foreign markets via export inauguration.
Topic:
Markets, Tariffs, and Imports
Political Geography:
Asia and South Korea

7. Collective Reputation in Trade: Evidence from the Chinese Dairy Industry

Author:
Jie Bai, Ludovica Gazze, and Yukun Wang
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Collective reputation implies an important externality. Among firms trading internationally, quality shocks about one firm’s products could affect the demand of other firms from the same origin country. We study this issue in the context of a large-scale scandal that affected the Chinese dairy industry in 2008. Leveraging rich firm-product level administrative data and official quality inspection reports, we find that the export revenue of contaminated firms dropped by 84% after the scandal, relative to the national industrial trend, and the spillover effect on non-contaminated firms is measured at 64% of the direct effect. Notably, firms deemed innocent by government inspections did not fare any better than noninspected firms. These findings highlight the importance of collective reputation in international trade and the challenges governments might face in signaling quality and restoring trust. Finally, we investigate potential mechanisms that could mediate the strength of the reputation spillover. We find that the spillover effects are smaller in destinations where people have better information about parties involved in the scandal. New firms are more vulnerable to the collective reputation damage than established firms. Supply chain structure matters especially in settings where firms are less vertically integrated and exhibit fragmented upstream-downstream relationships.
Topic:
International Trade and Finance, Markets, Business, Global Political Economy, and Accountability
Political Geography:
China and Asia

8. How does China fare on the Russian market? Implications for the European Union

Author:
Alicia Garcia-Herrero and Jianwei Xu
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
China’s economic ties with Russia are deepening. Meanwhile, Europe remains Russia’s largest trading partner, lender and investor. An analysis of China’s ties with Russia, indicate that China seems to have become more of a competitor to the European Union on Russia’s market. Competition over investment and lending is more limited, but the situation could change rapidly with China and Russia giving clear signs of a stronger than ever strategic partnership.
Topic:
Economics, Markets, Bilateral Relations, Governance, Investment, and Exports
Political Geography:
Russia, China, Europe, Eurasia, and Asia

9. Petro Dollar. Petro Yuan. Petro Rupee?

Author:
Amit Bhandari
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Gateway House: Indian Council on Global Relations
Abstract:
Over the last two decades, every component of the global energy scenario has changed: demand, supply and energy-type. The only constant has been the U.S. Dollar as the currency of energy trade. Lately, the Chinese Yuan has emerged to challenge the Dollar. Can the Indian Rupee be a third player? India is now the world’s third-largest consumer and second-largest importer of energy. Its open market, transparent regulation and growing demand give it an opportunity to become the hub of a vibrant new oil market, simultaneously ensuring its energy security and raising the international profile of the Rupee. This paper explores the possibility the Rupee could be the third currency in which energy is traded, and the challenges and opportunities it presents.
Topic:
Security, Energy Policy, Markets, Oil, Currency, and Trade
Political Geography:
China, South Asia, India, Asia, North America, and United States of America

10. China's plans and direction for further opening-up

Author:
Yang Panpan
Publication Date:
08-2018
Content Type:
Working Paper
Abstract:
This year marks the 40th anniversary of China's reform and opening-up, and will be the first year for China to hold the international import expo. This signals that China is further opening up its domestic market and striving to be more integrated with the world. Meanwhile, China is enduring the external uncertainties mainly from its biggest trade partner -- the U.S. One question should be asked: What is China's plan and direction for further opening-up? Since China is shifting from a mid-high-income country to a high-income country, the trajectory of other major developed countries may be a reference for China's further opening-up process. With this in mind, it's necessary to compare the opening-up pattern of these countries with China. One variable might fit this kind of observation -- the foreign value added in one country's final demand. This represent the amount of foreign input used in a country's consumption and investment. Examples include final goods consumed by households, capital goods invested by firms, or intermediate goods used to make products.
Topic:
Markets, Reform, Finance, and Economy
Political Geography:
China and Asia