Endogenous Policy Reform: Learning versus Flexibility in Industrial Policy Design for Open Economics

This paper studies government support which targets industries capable of learning. Monitoring procedures are implemented to prevent rent-seekers from non-learning industries. But this involves bureaucratic red tape that reduces flexibility in response to world market shocks. The main thrust of this study is that, as an economy develops, the balance shifts endogenously between the need for bureaucratic monitoring and the desirability for flexibility. An optimal strategy may be to support learning, with a certain degree of bureaucracy at an early stage when necessary, but to liberalize the policy toward laissez faire, as the economy matures. The results appear be consistent with empirical evidences in Asian countries.

Remittance Inflows and Energy Transition of the Residential Sector in Developing Countries

The energy transition is crucial for the United Nations’ Sustainable Development Goal 7 (affordable and clean energy). As remittances account for a significant share of household incomes in developing countries, they may be associated with the energy transition from low-efficiency residential fuels (e.g., coal and wood) to high-efficiency residential fuels (e.g., gas and electricity). This study examines the association between remittances and residential energy transition in developing countries by employing a pooled mean group autoregressive distributed lag (PMG-ARDL) model for 27 developing nations from 1995 to 2018. The results indicate that a 1% increase in remittances (ratio to GDP) is associated with a 0.24% increase in the share of high-efficiency energy sources in residential energy consumption in the long run

Remittance Inflows and Energy Transition of the Residential Sector in Developing Countries

The energy transition is crucial for the United Nations’ Sustainable Development Goal 7 (affordable and clean energy). As remittances account for a significant share of household incomes in developing countries, they may be associated with the energy transition from low-efficiency residential fuels (e.g., coal and wood) to high-efficiency residential fuels (e.g., gas and electricity). This study examines the association between remittances and residential energy transition in developing countries by employing a pooled mean group autoregressive distributed lag (PMG-ARDL) model for 27 developing nations from 1995 to 2018. The results indicate that a 1% increase in remittances (ratio to GDP) is associated with a 0.24% increase in the share of high-efficiency energy sources in residential energy consumption in the long run

An interplay between intrinsic and extrinsic motivations on voluntary contributions to a public good in a large economy

Voluntary contribution, Intrinsic and extrinsic motivations, Large economy,

Asymmetric response of unemployment rate to export shock in Indonesia: Does educational attainment matter?

Indonesia has long struggled with a high rate of unemployment. Export, one of the aggregate demand’s components, typically affects the unemployment rate as argued by Keynes. Therefore, this study attempts to evaluate the asymmetric response of unemployment rate to export shock in Indonesia. Employing a Local Projection method, the analysis incorporates three important features: the asymmetric effects of export shock (positive or negative), business cycle (boom or slump), and educational attainment of workers (highly-educated or less-educated). Dataset consisted of province-level annual panel data of 18 provinces in Indonesia where the main ports for export activity are located, spanning from the years of 1990 to 2019. This study finds significant differences in the unemployment rate dynamics between less-educated and highly-educated workers. A positive export shock during the boom reduced the unemployment rate for less-educated workers, and the effect is more persistent. In contrast, highly-educated unemployment rate decreased when a positive export shock occurs during the slump period, and the effect was rather in the short run. These results suggest some policy implications such as strengthening the domestic market, relaxing export regulation on labor-intensive industries, and diversifying export products to enlarge job opportunities for highly-educated workers with varied qualifications.JEL Classification E24; I25; O2

Dynamic incentive with nonfinancing threat and social sanction in rural credit markets

This paper analyzes an individual lending credit market in a rural society, where potential borrowers have a dynamic incentive of strategic default, and a benevolent lender gives them a credible threat to cut future credit when loands are not repaid. A crucial issue is that social sanction of default depends on the default rate in the society. Our analysis suggests that for a relatively small financing cost, a credit market exists where borrowers have little motivation to default voluntarily, associated with intense social sanctions. The results also reveal that a relatively large financing cost causes the credit market to collapse, since it raises motivation of default, associated with less intense social sanctions. These results could justify government support to reduce the lender’s financing cost. The model further illustrates the plausibility of two equilibria: a low default rate associated with a low lending rate and intense social sanctions, and a high default rate with a high lending rate and less intense social sanctions. This could explain the possibility that the default rate is different from village to village even though these societies seem to share an almost identical environment.Asymmetric information, Dynamic incentive of strategic default, Endogenous social sanction, Nonfinancing threat, Rural credit market