Stanford University

How Widespread Are Non-Linear Crowding Out Effects? The Response of Private Transfers to Income in Four Developing Countries

Paragraphs

This paper investigates whether there is a non-linear relationship between income and the private transfers received by households in developing countries. If private transfers are unresponsive to household income, expansion of public social security and other transfer programs is unlikely to crowd out private transfers, contrary to concerns first raised by Barro and Becker. There is little existing evidence for crowding out effects in the literature, but this may be because they have been obscured by methods that ignore non-linearities. If donors switch from altruistic motivations to exchange motivations as recipient income increases, a sharp non-linear relationship between private transfers and income may result. In fact, threshold regression techniques find such non-linearity in the Philippines and after accounting for these there is evidence of serious crowding out, with 30 to 80 percent of private transfers potentially displaced for low-income households [Cox, D., Hansen, B., and Jimenez, E., 2004, How responsive are private transfers to income? Evidence from a laissez-faire economy, Journal of Public Economics.]. To see if these non-linear effects occur more widely, semiparametric and threshold regression methods are used to model private transfers in four developing countriesChina, Indonesia, Papua New Guinea, and Vietnam. The results of our paper suggest that non-linear crowding-out effects are not important features of transfer behaviour in these countries. The transfer derivatives under a variety of assumptions only range between 0 and -0.08. If our results are valid, expansions of public social security to cover the poorest households need not be stymied by offsetting private responses.

All Publications button
1
Publication Type
Working Papers
Publication Date
Authors
Scott Rozelle

Return to Southeast Asia, Lame Duck President Finding a Quiet Pond

News Type
News
Date
Paragraphs

The 14th Informal APEC Economic Leaders' Meeting concluded on Nov. 19, 2006, and the participants had their photo taken in colorful Vietnamese traditional costumes called ao dai. Still in the shadow of the congressional election failure, President George W. Bush, realizing that a stable Asia is very important for the U.S. geostrategy, took advantage of the occasion to enhance the prestige of the United States. Just as American experts said, the Bush administration has probably become a lame duck now, but even a healthy duck needs to find a quiet pond.

"APEC's uniquely trans-Pacific character is an important political reason for U.S. to strengthen the group," Donald Emmerson, director of the Southeast Asia Forum of Shorenstein APARC at Stanford University, explained. "While APEC has lagged, East Asian regionalism has boomed. That has been good for East Asia. But U.S. and East Asian interests alike could be hurt if the Pacific Ocean ends up being split between rival Chinese and American spheres of influence."

However, the U.S. effort to save the Doha Round of trade talks with the Asia-Pacific Free Trade Agreement has yielded little. The Doha Round aimed to remove trade barriers in the world but was suspended due to some countries' agriculture protection policies. Washington had wanted to model the Doha Round upon the Asia-Pacific Free Trade Agreement. But U.S. officials never expected that there would be so many differences among the Asia-Pacific leaders, and that the economic development of Pacific Rim countries differ in thousands of ways. Despite the fact that the Hanoi Statement reiterated that supporting the Doha Round was APEC's priority, no material progress has been made.

"The U.S. is urging a last ditch effort to restart the talks through APEC," Professor Charles Morrison, president of the East-West Center located in Hawaii, says. "Whether or not APEC can do more than make a rhetorical statement of support is unsure. I feel that the APEC economies should agree to prepare new offers within a short period of time -- three weeks, for example -- to challenge the Europeans, Brazilians, Indians and others."

United States Steps Out to "Please" ASEAN

Seventeen years after its establishment, APEC now plays a decisive role in the international political arena. It has 40 percent of the world's population, 48 percent of the world trade volume and 56 percent of the world GDP. Since 1989, the economy in this region has grown by 26 percent, compared to only 8 percent economic growth rate in the rest of the world. With the double advantage of economic strength and rapid growth, China, being one of APEC's main economies and its "engine," has fully taken the limelight. On the other hand, the United States has been weighed down with countering terrorism in the Middle East.

"China has done very well in enhancing its relations with Southeast Asia in recent years," Sheldon Simon, professor of the Program in Southeast Asian Studies at Arizona State University, points out. "China has not only established a free trade forum for China and ASEAN countries, but also helped and influenced the area with its economy and culture. But I think that the United States has realized the importance of this area and come back to fasten its friendly relationship with the region."

The United States coming back to Southeast Asia and repairing its relations with the ASEAN countries is partly activated by China's increasing influence in the area.

"The naissance and growth of some democratic countries in Southeast Asia has received sympathetic response of democratic values from Washington," said Simon. "With the traditional friendly relations between the area and the United States, these countries value their friendship with the United States sometimes more than the trust in their neighboring countries. Geopolitics is also very important factor. The Asia-Pacific area is a very important to the world economy and the U.S. power structure. Therefore, the United States will not easily give it up."

Another motive for the United States to foster closer relations in the area is the common interest of countering terrorism. There are still some terrorist groups in Indonesia, the Philippines and southern Thailand.

"President Bush has a perfect attendance record at APEC meetings (Clinton missed two of them), which says that he does take APEC seriously and believes Asia is important to U.S. interests," Ralph Cossa, president of the Pacific Forum Center for Strategic and International Studies, said in an interview with the Washington Observer Weekly.

Besides attending the APEC summit meetings annually, Washington has recently activated several plans to "please" the ASEAN countries, including setting up a ministerial dialogue system with them and a platform for maintaining contact at the deputy finance minister level, even increased exchanges at the deputy defense secretary level.

The extent of U.S. efforts to foster cordial relations with Southeast Asian countries can also be seen in the increasingly friendly U.S.-Vietnamese economic and trade relations. The Bush administration is not only supporting Vietnam to enter the WTO, but has even proposed giving Vietnam Permanent Normal Trade Relations (PNTR) status.

"The reason that Bush failed to bring the gift of PNTR status to the APEC Hanoi summit is that the Congress dominated by the Republicans was lacking efficiency and could not pass the proposal in time," Simon explained. "But I think that it will be passed as soon as possible in the next month or by the Democrats who begin to dominate the Congress from next January."

Simon and Cossa both admit that Burma is an unharmonious element in U.S. relations with ASEAN. The Burmese dictatorial military government is really the most typical negative example of democracy for the United States. But ASEAN countries are reluctant to see Burma "punished" by the United States for ideological reasons. So Burma has become a sensitive issue in U.S.-ASEAN relations.

"This is a good way for him to interact with ASEAN since Myanmar is not there and this issue does not have to be addressed," said Cossa.

Simon, an expert of Southeast Asia affairs, points out ASEAN countries should be happy about the advantage they have with China and the United States vying for their attention. Being able to juggle the two big powers, Southeast Asia has gained many practical interests and financial aid for its economy, trade, security, culture and education.

"In a short period, there will not be any serious interest conflicts in the triangle balance of China, the United States and ASEAN," Simon told the Washington Observer Weekly. "ASEAN countries' only worry, if there is any, is an accidental spark in the U.S.-China military interaction in Southeast Asia such as the confrontation across the Taiwan Straits."

Turning the Asia-Pacific into a "Gigantic Enterprise?"

"The United States wants to demonstrate its continuing interest in the Asia-Pacific region. It is urging for a study of an Asia Pacific free trade area and support for an APEC business card, and both shifts of approach, illustrate its interest in and support for the APEC process," said Morrison.

An important subject for the APEC Hanoi summit is the "active discussion" of establishing an APEC free trade region. Former U.S. President Bill Clinton proposed for the first time in 1993 the setting up of such an economic zone. Before Bush's visit, Deputy U.S. Trade Representative Karan Bhatia suggested that establishing an APEC free trade zone would be a subject worth serious discussion. But his proposal did not receive a warm response from the host. The Vietnamese Deputy Foreign Minister Le Cong Phung stressed that establishing a free trade zone is a long-term objective and will not affect progress of negotiations with the WTO or other bilateral trade agreements.

"Regarding the study of the Asia Pacific free trade area, a number of economies were skeptical because it would be such a large undertaking," said Morrison. A similar plan was once axed in an APEC ministerial statement and the leaders attending this summit do not seem to have much interest in it.

Simon explained Bush's thinking on the subject: "Washington reiterated its intention to establish an Asia-Pacific free trade zone in order to save the precarious WTO Doha Round. Breaking the tariff barriers in the Asia-Pacific region will help continue to press relevant countries to concede in granting agricultural tax subsidies and hopefully open the door to the Doha Round."

The five-year Doha Round was suspended in July this year because six major WTO members -- the United States, the European Union, Japan, Australia, Brazil and India -- failed to reach agreement on market access for agricultural and non-agricultural products. Given the situation, the organizer said that the informal APEC economic leaders' meeting would provide a "good opportunity" to help restore the Doha Round talks. However, the Hanoi summit joint declaration just vaguely indicated that APEC will pursue further integration on issues such as energy in 2007. It would be extremely optimistic to expect that APEC will be able to remove all the tariff barriers in the region before 2010. Although the area produces 50 percent of the world's economic value, the styles and stages of economic development, the cultural backgrounds and political systems of the countries in the region vary a great deal, making it very difficult for these Asian countries to eliminate all these discrepancies and become fully integrated.

"Out of different worries, many Southeast Asian countries are actually not interested in the proposal though they do not speak out. Or we may say that it's not time yet now to change the Asia-Pacific region into a gigantic enterprise," Simon told Washington Observer Weekly.

Quite apart from who concedes what in return for what concession over the APEC free trade mechanism, the question arises: What geographical scope should a regional trade arrangement have? Who should be a party to the agreement and who should not?

There would appear to be three different ideas on the table: (a) the APEC-wide free trade area that the United States proposed at the recent summit in Hanoi; (b) the East Asia Summit-wide framework that Japan reportedly favors, which would include ASEAN + 6 (China, Japan, South Korea, India, New Zealand, Australia) but not the United States; and (c) the ASEAN Plus Three (China, Japan, South Korea) context that China seems to prefer, in which the exact positions of Tokyo and Beijing are not entirely clear.

"Without discussing the merits or demerits of each of these arrangements, suffice it to note that since ASEAN is common to all of them, the net effect of these alternative ideas is to strengthen the negotiating position of ASEAN," said Emmerson. "Then again, ASEAN will not necessarily be unified as to its preference for the three proposals. It will be interesting to look for the positions to be taken by individual ASEAN countries and for their collective effort to arrive at a single negotiating position, e.g., in the run-up to the ASEAN summit and the second the East Asia Summit in the Philippines next month."

Cossa has hope for 2007. "The U.S. in particular would like to see APEC moving faster, and will look ahead to next year, with Australia in the chair, for some real progress."

American Public Doesn't Share Washington's Interest in Southeast Asia

The prospect of economic and strategic cooperation brought about by APEC made for a lively week in Southeast Asia. But it stirred little response in the United States. According to the interviewed experts of Southeast affairs, the American public is still haunted by the situation in Iraq and the mid-term election. Even the U.S. media framed the event as Bush's first visit to a foreign country since the Republicans were defeated in the mid-term election.

"Because of the Congressional election, President Bush will want to show leadership rather than simply respond to the new Congress. Both Doha and the nuclear proliferation issue are examples," said Morrison.

Cossa holds a different view: "I don't think the elections will have any major impact on what Bush does or how he does it during this trip. Iraq is his legacy. What he does in Asia can make things better or worse at the margins but will likely be overshadowed by Iraq."

Simon echoed the sentiment. "On one hand, the Republican Party's defeat in the election cannot directly influence Bush's trip to Asia. On the other hand, Bush's economic achievements in the Southeast region will not add to his political record. In Asia, only the North Korea issue may sway the public opinion in the United States."

Yan Li, Washington Observer weekly - Issue No. 201, November 22, 2006

Reprinted by Permission February 12, 2007.

All News button
1

Globalization for Whom? Market Discipline and Corporate Subsidy in the Era of Transnational Hyper-Capitalism

-

Sameer Dossani is director of "50 Years is Enough: U.S. Network for Global Economic Justice", a coalition of over 200 U.S. grassroots, women's, solidarity, faith-based, policy, social- and economic-justice, youth, labor, and development organizations dedicated to the transformation of the World Bank and the International Monetary Fund (IMF).

Dossani has been campaigning against the World Bank and IMF since the early 1990s, when he was a student activist at McGill University, Canada. Most recently, he was the executive director of the NGO Forum on the Asian Development Bank, based in Manila, Philippines, where he had the opportunity to work closely with Asian NGOs and peoples movements working for economic justice.

Sponsored by the Program on Global Justice and Stanford Humanities Center.

Encina Ground Floor Conference Room

Sameer Dossani Director Speaker 50 Years is Enough: U.S. Network for Global Economic Justice
Workshops
Linda Randall Meier Research Workshop on Global Justice

Taking Guns to a Knife Fight: Effective Military Support to Counterinsurgency

-

Lieutenant Colonel Joseph H. Felter (speaker), a career Special Forces and Foreign Area Officer, is the director of the Combating Terrorism Center at West Point and an instructor in the U. S. Military Academy's terrorism studies program. His military experience includes service as a platoon leader with the 75th Ranger Regiment and as a Special Forces operational detachment-alpha and company commander in the 1st Special Forces Group. As a military attaché in Manila, he planned and coordinated combined efforts to develop the counter terrorist capabilities of the Armed Forces of the Philippines. Felter is a graduate of the United States Military Academy, earned a master's degree from the Kennedy School of Government at Harvard University and received his PhD in political science from Stanford University. His dissertation assesses the impact that variation in quality and structures of state internal security forces has on efforts to combat insurgency and terrorism.

David Patel (respondent) is a 2006-2007 predoctoral fellow at both CDDRL (fall quarter) and CISAC (winter and spring quarters). He is completing a dissertation looking at questions of religious organization and collective action in the Middle East, with a theoretical focus on the relationship of organization and information in particular. Empirically, his study looks at Islamic institutions and their role in political action in a wide range of settings including 7th century garrison cities of the early Islamic empire, through the U.S.-led occupation of Iraq. Patel has spent a great deal of time in the Middle East over the last several years, including extended visits to Yemen, Morocco, Jordan, and Iraq, where he spent seven months in Basra conducting research beginning in the fall of 2003. He works with David Laitin, Jim Fearon, and Avner Greif at Stanford. In fall 2007 he will join the faculty at Cornell University as an assistant professor of political science.

Reuben W. Hills Conference Room

Lt. Col. Joe Felter Director, Combating Terrorism Center, and Assistant Professor, Department of Social Sciences Speaker U.S. Military Academy, West Point
David Patel Commentator
Seminars

The Afghan Success Story that Failed: How U.S. efforts to bring peace and prosperity to post-war Afghanistan are being derailed by insurgency, drugs, and corruption

-

Pamela Constable is the deputy foreign editor of The Washington Post. Previously she covered South Asia for The Washington Post for several years from April 1999, with extensive coverage of Afghanistan as well as both India and Pakistan.n She continues to visit and report from Afghanistan.

Before arriving in New Delhi in 1999, Constable worked for The Post from 1994 to 1998 covering immigration and Hispanic affairs in the Washington area, and reported from Honduras, El Salvador, Haiti and Cuba.

Prior to joining The Post, Constable worked for The Boston Globe as deputy Washington bureau chief and foreign policy reporter from June to September 1994. From 1983 until 1992, she was The Globe's roving foreign correspondent, Latin America correspondent and diplomatic correspondent. During this time she reported from Haiti, Chile, Peru, Argentina, Cuba, Colombia, El Salvador, Nicaragua, Mexico, South Korea, the Philippines, the Soviet Union and Brazil, as well as in Washington.

Her latest book is Fragments of Grace: My Search For Meaning in the Strife of South Asia. She is the co-author with Arturo Valenzuela of A Nation of Enemies: Chile Under Pinochet and has written articles for Foreign Affairs, Foreign Policy, Current History and other publications. She was awarded an Alicia Patterson Fellowship in 1990 and the Maria Moors Cabot Prize for coverage of Latin America in 1993. Constable is a member of the Council on Foreign Relations. She received a B.A. from Brown University.

CISAC Conference Room

Pamela Constable The Washington Post Speaker
Conferences

Trade on Human Terms: Transforming Trade for Human Development in Asia and the Pacific

-

Against the backdrop of export-led growth of some economies -- most notably China and India -- human development issues in Asia tend to be overlooked. The 2006 report Trade on Human Terms, produced by the United Nations Development Programme, finds that trade has contributed to further increasing the inequality both between and within countries. In addition, it warns that many of the region's open economies, particularly the East Asian success stories, are creating far fewer jobs, especially for youth and women, and experiencing "jobless growth." Many of the developing countries in the Asia-Pacific are now net importers of agricultural products; food security has thus become an emerging issue.

While Asia and the Pacific have embraced globalization, the regions poor are being left behind and will be so without determined action by governments. The report recommends that those countries adopt bold new policies that harness trade and economic growth, suggesting an "eight-point agenda" that includes investing for competitiveness; adopting strategic trade policies; restoring a focus on agriculture; combating jobless growth; and others.

Dr. Hafiz A. Pasha will discuss the findings and recommendations of this ground-breaking and thoughtful report which can be viewed at:

Asia - Pacific Human Development Report 2006

Dr. Hafiz A. Pasha is UN assistant secretary-general and UNDP assistant administrator and director of the Regional Bureau for Asia and the Pacific. He has served as the commerce and trade minister, minister for finance and economic affairs, deputy chairman of the Planning Commission, and education minister in three government administrations in Pakistan.

Prior to his government work, Dr. Pasha was the vice chancellor/president of the University of Karachi and dean and director of the Institute of Business Administration in Karachi, Pakistan.

Dr. Pasha has published extensively in the fields of trade, public finance, social development, and poverty reduction. He has an M.A. from Cambridge University and a Ph.D. from Stanford University.

Pasha was recently awarded the Congressional Medal of Achievement by the Philippines Congress in recognition of his work on poverty reduction, achievement of the Millennium Development Goals (MDGs) by the Asia-Pacific countries and his role in leading UNDP's response to the 2004 tsunami tragedy.

Philippines Conference Room

Hafiz A. Pasha UN Assistant Secretary General and Director of the Regional Bureau for Asia and the Pacific Speaker The United Nations Development Programme
Seminars

Explaining Policy Outcomes in the Philippines: Is the President Too Strong, or Is Congress?

-

Who influences policy outcomes in the Philippines? While most analysts agree that the quality of policymaking has been poor, they offer two very different explanations. Some blame a too-strong presidency: Presidents keep personal control over policy, so policies change when one president succeeds another. Discontinuity undermines performance. Other observers blame the power of congress: Legislators have stymied presidential agendas for reform, while presidents have been powerless to stop congress from failing to act or from acting to undermine reform. Takeshi Kawanaka takes a different approach. He argues that while presidents have control of fiscal policy, congress is dominant when it comes to ordinary legislation. It is the allocation not the concentration of power that facilitates short-sighted pork-barrel politics and inhibits the growth of cohesive and disciplined political parties.

Takeshi Kawanaka, a visiting scholar in the Shorenstein Asia-Pacific Research Center, has written mainly on Philippine politics. After two years of field work on local governance and political machines, he wrote Power in a Philippine City (2002). More recently he edited The Philippines in the Post EDSA Period (2005, in Japanese), which deals with the interaction between democratic consolidation and economic liberalization. His current research is on the role of political institutions in shaping policy outcomes in new democracies. He received his PhD in political science from Kobe University, and his MA and BA from Waseda University.

Daniel and Nancy Okimoto Conference Room

Takeshi Kawanaka

Shorenstein APARC
Stanford University
Encina Hall, Room E301
Stanford, CA 94305-6055

(650) 723-9741 (650) 723-6530
0
Visiting Scholar
T_Kawanaka.jpg PhD

Takeshi Kawanaka is a 2005-06 visiting scholar at Shorenstein APARC, and a senior research fellow at the Institute of Developing Economies (IDE), Japan. He was a visiting research associate at the University of the Philippines from 1996 to 1998.

Since Kawanaka joined IDE in 1993, he has been working on politics in developing countries. He did field research mainly in the Philippines. He wrote a book on local politics, Power in a Philippine City (Chiba: IDE) and edited a book on post-democratization politics, The Philippines in the Post EDSA Period (in Japanese, Chiba: IDE). Now, he works on political institutions and policy outcomes in new democracies.

Kawanaka received BA and MA in Law from Waseda University and a PhD in political science from Kobe University. He taught courses on Southeast Asian Politics at Komazawa University and Seijo University. Aside from Japanese and English, he speaks Tagalog.

Takeshi Kawanaka Speaker
Seminars
Southeast Asia Program

China's Rise and Implications for the Korean Peninsula: Why the US-ROK Alliance will Inevitably Change

-

The US-ROK alliance has come under increasing strains in the past few years. Often this is attributed to emotion: a naive young generation of Koreans or perhaps resentment over Apollo Ohno's victory in the past winter Olympics. However, the strains arise from deeper, more enduring reasons. One factor that is not often discussed is how China's rise is affecting the US-ROK alliance. South Korea, once again, is caught between powers much larger than itself. There are no easy answers, but an understanding of the real pressures on the Korean peninsula is a way to begin.

David Kang is associate professor of government, and adjunct associate professor and research director at the Center for International Business at the Tuck School of Business at Dartmouth. He has scholarly interests in both business-government relations and international relations, with a focus on Asia. At Tuck he teaches courses on doing business in Asia, and also manages teams of MBAs in the Tuck Global Consultancy Program that conduct in-country consulting projects for multinational companies in Asia.

Kang's book, Crony Capitalism: Corruption and Development in South Korea and the Philippines (Cambridge University Press, 2002), was named by Choice as one of the 2003 "Outstanding Academic Titles". He is also author of Nuclear North Korea: A Debate on Engagement Strategies (co-authored with Victor Cha) (Columbia University Press, 2003). He has published scholarly articles in journals such as International Organization, International Security, Comparative Politics, International Studies Quarterly, and Foreign Policy.

Philippines Conference Room

David Kang

Shorenstein APARC
Stanford University
Encina Hall E301
Stanford, CA 94305-6055

(650) 725-6392 (650) 723-6530
0
Visiting Professor
David_Kang.jpg PhD

David Kang is associate professor of government, and adjunct associate professor and research director at the Center for International Business at the Tuck School of Business at Dartmouth. He has scholarly interests in both business-government relations and international relations, with a focus on Asia. At Tuck he teaches courses on doing business in Asia, and also manages teams of MBAs in the Tuck Global Consultancy Program that conduct in-country consulting projects for multinational companies in Asia.

Kang's book, Crony Capitalism: Corruption and Development in South Korea and the Philippines (Cambridge University Press, 2002), was named by Choice as one of the 2003 "Outstanding Academic Titles". He is also author of Nuclear North Korea: A Debate on Engagement Strategies (co-authored with Victor Cha) (Columbia University Press, 2003). He has published scholarly articles in journals such as International Organization, International Security, Comparative Politics, International Studies Quarterly, and Foreign Policy. He is a frequent radio and television commentator, and has also written opinion pieces in the New York Times, the Financial Times, the Los Angeles Times, Chosun Ilbo (Seoul), Joongang Ilbo (Seoul), and writes a monthly column for the Oriental Morning News (Shanghai). Kang is a member of the editorial boards of Political Science Quarterly, Asia Policy, IRI Review, Business and Politics, and the Journal of International Business Education.

Professor Kang has been a visiting professor at Stanford University, Yale University, Copenhagen Business School (Denmark), the University of Geneva IO-MBA program (Switzerland), Korea University (Seoul, Korea) and the University of California, San Diego. He received an AB with honors from Stanford University and his PhD from University of California, Berkeley.

David Kang Speaker
Seminars
Korea Program
Subscribe to Philippines