Economics Working Papers

The ADB Economics Working Paper Series is a forum for stimulating discussion and eliciting feedback on ongoing and recently completed research and policy studies undertaken by the Asian Development Bank (ADB) staff, consultants, or resource persons. The series deals with key economic and development problems, particularly those facing the Asia and Pacific region; as well as conceptual, analytical, or methodological issues relating to project/program economic analysis, and statistical data and measurement. The series aims to enhance the knowledge on Asia's development and policy challenges; strengthen analytical rigor and quality of ADB's country partnership strategies, and its subregional and country operations; and improve the quality and availability of statistical data and development indicators for monitoring development effectiveness.

  • 01 Jul 2012 | Publication

    Vertical Gravity

    The paper examines the drivers of international production networks and vertical trade integration in an augmented gravity model that employs the newly developed Network Trade Index. Based on bilateral trade data among 75 countries from 1998 to 2005, the findings emphasize trade policy's role in facilitating network trade. For example, a 10% tariff reduction raises vertical trade by 6.2%, on average. Preferential trade agreements are found to significantly boost vertical integration.
  • 01 Jun 2012 | Publication

    Global Value Chains and the Transmission of Business Cycle Shocks

    In this paper, we investigate empirically two channels through which a country's integration into global value chains (GVCs) may increase the income elasticity of its exports. First, GVCs may simply be concentrated in sectors that are more sensitive to external income fluctuations (a composition effect). Alternatively, some characteristics inherent to GVCs may trigger a faster and more amplified propagation of business cycle shocks (a supply chain effect). Using trade data of the People's Republic of China, we find supporting evidence for the composition effect.
  • 01 Jun 2012 | Publication

    Inequality of Human Opportunities in Developing Asia

    The paper analyzes equity of opportunity in basic education and infrastructure services in seven developing countries, namely, Bangladesh, Bhutan, Indonesia, Pakistan, the Philippines, Sri Lanka, and Viet Nam. It uses a method developed by the World Bank called the Human Opportunity Index. The study finds that inequality of opportunity is driven mainly by per capita household expenditure. This suggests that household poverty plays a crucial role in determining equitable access to basic services.
  • 01 Apr 2012 | Publication

    Malaysia's Investment Malaise: What Happened and Can It be Fixed?

    Private investment in Malaysia has never fully recovered from the impact of the Asian financial crisis (AFC). Both domestic and foreign investment have remained lackluster post-AFC; while foreigners continue to shun Malaysia, it seems even domestic investors are fleeing as well, with Malaysia having become a net exporter of capital since 2005. The crucial questions are: what happened and can it be fixed?
  • 01 Apr 2012 | Publication

    Rural-Urban Migration and Employment Quality: A Case Study from Thailand

    This study uses a panel database of rural households in Thailand collected from 2008-2010 to investigate the effects of rural-urban migration on economic development. One finding is that social protection policies for the rural poor in Thailand may be less effective for urban migrants. Another is that while migration increases income growth among rural households, it is less effective in reducing inequality and relative poverty in rural areas.
  • 01 Mar 2012 | Publication

    Tracking the Middle-Income Trap: What is It, Who is in It, and Why? (Part 2)

    Jesus Felipe provides empirical evidence that supports the hypothesis that some countries get stuck in the middle-income trap as a result of not being able to increase the diversification and sophistication of their export packages. A comparison of the Republic of Korea, Malaysia, and the Philippines shows that the Republic of Korea diversified into more and more sophisticated products than the other two countries.
  • 01 Mar 2012 | Publication

    Tracking the Middle-Income Trap: What is It, Who is in It, and Why? (Part 1)

    Jesus Felipe provides a working definition of the middle-income trap. In 2010 and out of 124 countries with available data, there were 52 middle-income countries, of which 35 were in this trap. Of the 35, 13 were in Latin America, 11 in the Middle East and North Africa, six in Sub-Saharan Africa, three in Asia, and two in Europe. The three Asian countries trapped were the Philippines, Sri Lanka, and Malaysia, although the last two may escape it soon. Indonesia and Pakistan are at the risk of falling into it in the coming years. The People's Republic China and India are not in the trap.
  • 01 Feb 2012 | Publication

    A Welfare Evaluation of East Asian Monetary Policy Regimes under Foreign Output Shock

    Joseph D. Alba, Wai-Mun Chia, and Donghyun Park assess the welfare impact of external shocks under different monetary policy regimes in East and Southeast Asia. To do so, they numerically solve and calculate the welfare loss function of a dynamic stochastic general equilibrium (DSGE) model with complete exchange rate pass through. Their DSGE model simulation results suggest that consumer price index inflation targeting delivers the least welfare losses for most small open economies in East and Southeast Asia.
  • 01 Feb 2012 | Publication

    Reexamining Policies for Food Security

    In the wake of recent food price spikes, plus growing demands for food in emerging Asia and for biofuels in Europe and the United States, governments are reexamining their strategies for dealing with both short-term and long-term food security concerns. This paper argues that long-run trends in real agricultural prices have policy implications for food security that are at least as important as those related to short-lived spikes around trend prices.
  • 01 Jan 2012 | Publication

    Going Regional: How to Deepen ASEAN's Financial Markets

    This study identifies the key issues involved in the further development and deepening of financial markets in the Association of Southeast Asian Nations (ASEAN). For the smaller ASEAN countries, the first priority is the development of the banking system. In the larger ASEAN+3 economies, banking systems are already reasonably well-developed, while stock markets and government bond markets have evidently achieved critical mass even while remaining purely domestic markets.