This is more of a first stab at the subject, as I haven’t had time to really play with the data yet. So there won’t be much in the way of analysis beyond eyeballing the charts. The source of the data is from the Economic Planning Unit, and appears to be aggregated from various Household Income Surveys (HIS).
Here’s the time series for Malaysia’s Gini Coefficient:
Another paper from this week’s NBER working paper series – chalk this one up as adding to the literature over the ambiguous relationship between democracy and democratic institutions on the one hand, and economic growth and development on the other (abstract; emphasis added):
The Democratic Transition
Fabrice Murtin, Romain WacziargOver the last two centuries, many countries experienced regime transitions toward democracy. We document this democratic transition over a long time horizon. We use historical time series of income, education and democracy levels from 1870 to 2000 to explore the economic factors associated with rising levels of democracy. We find that primary schooling, and to a weaker extent per capita income levels, are strong determinants of the quality of political institutions. We find little evidence of causality running the other way, from democracy to income or education.
Note that the paper defines the relationship very narrowly, examining the relationship between just three variables – education, income and democracy (here proxied by the Polity index). I can’t speak to the methodology used here as I’m not fully conversant with it, but I would be concerned over possible omission of other variables that might change the results. Single equation methods, even with a large panel dataset, might lead to spurious regression results.
Nevertheless, the results obtained here resonate with my own views. Economic institutions and legal frameworks (probably) matter for development and growth, political institutions not so much.
Technical Notes
Murtin, Fabrice & Romain Wacziarg, "The Democratic Transition", NBER Working Paper No. 17432, Issued in September 2011
There’s plenty of blame to go around in looking at the causes of the Great Recession, and there’s also plenty of controversy and tension between major and emerging economies regarding the policies followed in its aftermath, in particular the role of monetary policies.
A new report published today discusses the future of central banking in this context:
Central banks have massively broadened their remit in recent crisis-laden years, but the standard analytic framework – ‘flexible inflation targeting’ – has not changed. This column argues that it is time to properly flesh out an alternative framework. Financial stability should be an explicit mandate of central banks, and international coordination among central banks should be boosted by forming a small group of systemically significant central banks that regularly meets and issues reports to the G20 on their financial-stability policies.
The VoxEU article linked to above summarises the findings, but you can read the original report here. The authors are some of the heavy hitters of the economics and finance profession, so the report should be taken seriously. And the recommendations aren’t too far-fetched either, in fact largely in line with what many central banks have attempted both during and after 2008. Perhaps the biggest change from past orthodoxy is the addition of financial stability as an explicit mandate, and the backing of the use of macro and micro prudential tools.
An additional difference is a proposal for systemically important central banks to meet regularly, report to the G20, and (hopefully) coordinate and communicate their policies jointly. In the absence of a global central bank, this is perhaps the next best alternative to a unified global monetary policy. Whether anyone will actually implement any of this is of course another thing entirely.
Technical Notes:
Eichengreen et al, “Rethinking the Role of Central Banking", The Committee on International Economic and Policy Reform, The Brookings Institution, September 2011
From this week’s round of NBER working papers (abstract; emphasis added):
The Political Economy of Deforestation in the Tropics
Robin Burgess, Matthew Hansen, Benjamin A. Olken, Peter Potapov, Stefanie SieberTropical deforestation accounts for almost one-fifth of greenhouse gas emissions worldwide and threatens the world's most diverse ecosystems. The prevalence of illegal forest extraction in the tropics suggests that understanding the incentives of local bureaucrats and politicians who enforce forest policy may be critical to understanding tropical deforestation. We find support for this thesis using a novel satellite-based dataset that tracks annual changes in forest cover across eight years of institutional change in post-Soeharto Indonesia. Increases in the numbers of political jurisdictions are associated with increased deforestation and with lower prices in local wood markets, consistent with a model of Cournot competition between jurisdictions. Illegal logging increases dramatically in the years leading up to local elections, suggesting the presence of "political logging cycles". And, illegal logging and rents from unevenly distributed oil and gas revenues are short run substitutes, but this effect dissapears over time as political turnover occurs. The results illustrate how incentives faced by local government officials affect deforestation, and provide an example of how standard economic theories can explain illegal behavior.
Sound familiar? Just sayin'
Technical Notes
Burgess, Robin and Matthew Hansen, Benjamin A. Olken, Peter Potapov, Stefanie Sieber, "The Political Economy of Deforestation in the Tropics", NBER Working Paper No. 17417, September 2011
From last Saturday’s Star (excerpt):
…Over the last one to two years, the increase in Malaysia's household debt has been largely fuelled by the availability of cheap mortgage rates arising from the cut-throat competition in the housing loan market.
Cheap money has enticed people to borrow and the rate of which households are taking on debt to buy houses, cars or finance renovations or holidays has indeed grown.
Since the 2008 global financial crisis, Malaysia's household debt service ratio, which measures the ratio of debt payments to disposable personal income, has jumped about 10 percentage points to 49% in 2009 before easing slightly to 47.8% last year…
I hadn’t intended to post on anything today (too busy), but the PM’s Malaysia day announcement quite overturned that intention. I’ll be the first to admit my innocence with respect to political and social matters, but even to these tyro’s eyes, the promised repeal of the ISA and emergency ordinances, and the abolishment of annual reviews of media licenses, is a pretty significant step:
PM announces repeal of ISA, three Emergency proclamations
KUALA LUMPUR: Several draconian laws including the ISA and the three Emergency proclamations are to be repealed under major civil liberty reforms announced by Prime Minister Datuk Seri Najib Tun Razak on Thursday.
The historic changes, he stressed, were to accommodate and realise a mature, modern and functioning democracy; to preserve public order; enhance civil liberty and maintain racial harmony.
The changes, which represent the biggest shake-up of the Malaysian system since independence from Britain in 1957, were announced by the Prime Minister in a prime-time television address on the eve of celebrations marking the anniversary of the foundation of modern Malaysia.
If Tunku was the father of the nation, and Tun Mahathir oversaw its economic maturation, would Najib be acknowledged as beginning our political maturation? Only the passage of time will answer that – and to be fair, none of these changes will significantly impact the day-to-day lives of ordinary Malaysians. But the change in the atmosphere, of the constant self-censorship, of affirming the right of freedom of expression and assembly; these things matter.
So happy birthday Malaysia, we’ve just gotten one hell of a birthday present.
P.S. Is it too much now to ask for local government elections?
Once upon a time, four development economists decided to start blogging. At the same time, two of them wondered whether blogging had any impact or was at all worthwhile. To make a long story short, they decided to research the issue, and made an experiment out of the launch of their own blog (abstract):
The Impact of Economics Blogs
McKenzie, David; Ozler, BerkSummary: There is a proliferation of economics blogs, with increasing numbers of economists attracting large numbers of readers, yet little is known about the impact of this new medium. Using a variety of experimental and non-experimental techniques, this study quantifies some of their effects. First, links from blogs cause a striking increase in the number of abstract views and downloads of economics papers. Second, blogging raises the profile of the blogger (and his or her institution) and boosts their reputation above economists with similar publication records. Finally, a blog can transform attitudes about some of the topics it covers.
I don’t know enough to know if school-based management systems are implemented here in Malaysia (if not, why not?). I do know that some schools have been given greater autonomy in managing their affairs, but I confess I can’t recall to what degree, how many are involved, and at what level. But it’s an interesting idea – anybody have further info on this topic, feel free to sound off in the comments.
While I’ve been upfront about my support for expanding access to tertiary education and prioritising vocational education, the fact is and remains that pre-school education might be more crucial than the rest of the education system put together (here and here for reference), and primary education more important than latter levels. Of course, in this context, the role of parental role models and tutoring is evident – the point of education in these early years is not about gaining knowledge, but about gaining skills, particularly the ability to learn as opposed to learning. It’s about the habit of thinking and interpersonal interaction, and not about facts and theorems.
I stumbled upon this article yesterday and couldn’t quite believe what Thailand is attempting (excerpt):
Thailand May Cede No. 1 Rice Ranking to Raise Rural Incomes
Sept. 13 (Bloomberg) -- Thailand is willing to relinquish its role as the world’s biggest rice exporter as the government prepares to buy grain directly from farmers to boost prices and rural incomes, Deputy Prime Minister Kittiratt Na-Ranong said…
…Prime Minister Yingluck Shinawatra aims to insulate the country of 66 million people from a global slowdown by lifting incomes of poorer Thais who propelled her party to victory in a July election. The plan to guarantee rice prices may boost export rates by almost 20 percent and erode the nation’s share of the global market, said Sarunyu Jeamsinkul, deputy managing director at Asia Golden Rice Ltd., Thailand’s largest shipper…
...The government plans to pay 15,000 baht per ton ($498) for unmilled white rice and 20,000 baht for Hom Mali fragrant rice, as much as 47 percent above current market rates, according to Bloomberg News calculations based on data from the Thai Rice Mills Association. Purchases are due to start on Oct. 7.
The September 2011 issue of the IMF’s Finance and Development magazine takes a look at global income inequality (from the Editorial; link to the table of contents at the end of this post):
WE used to think that overall economic growth would pull everyone up. While the rich might be getting richer, everyone would benefit and would see higher living standards. That was the unspoken bargain of the market system.
But now research is showing that, in many countries, inequality is on the rise and the gap between the rich and the poor is widening, particularly over the past quarter-century.
With taxpayers forced to pay for troubles in the financial industry in advanced economies during the global economic crisis, this discrepancy seems particularly galling to wage-earners who have seen their pay stagnate or worse. Inequality has started to attract more research by economists.
This issue of Finance & Development looks at income inequality around the world and how it matters.
As a follow up to my post last week on economic dynamics:
Carry Trades Lose Most in Year as Slow Growth Boosts Dollar
Sept. 12 (Bloomberg) -- Slowing economic growth around the world is punishing investors who bet on Australian and Brazilian assets using money borrowed in dollars and yen with the biggest losses in more than a year.
A UBS AG index tracking the performance of carry trades where investors sell currencies with low interest rates to buy ones in 24 markets with higher yields has tumbled 2.6 percent this month after losing 2.2 percent in August and 3.1 percent in July, the biggest back-to-back monthly drop since May and June 2010. The dollar has appreciated 6.2 percent against a basket of nine developed-nation peers from its low this year on Aug. 1, with the yen up more than 5 percent from the same day, according to Bloomberg Correlation-Weighted Currency Indexes.
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