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This paper investigates a mixed duopoly model in which there is a state-owned firm competing with a foreign joint-stock firm. The following situation is considered. In the first period, each firm non-cooperatively decides how many it sells in the current market. In addition, each firm can hold inventories for the second-period market. By holding large inventories, a firm may be able to commit to large sales in the next period. In the second period, each firm noncooperatively chooses its second-period output. At the end of the second period, each firm sells its first-period inventory stocked and its secondperiod output. The paper discusses the firms’ reaction functions in the mixed duopoly model.

Keywords: Inventory holding, state-owned firm, foreign joint-stock firm, reaction curves

To cite this article:

Ohnishi, K. (2022). Inventory Holding and a Mixed Duopoly with a Foreign Joint-Stock Firm. Asian Journal of Economics and Business, Vol. 3, No. 1, pp. 1-14.

Despite its high implication into global value chains (GVCs), the Chinese real domestic value added in exports increased at an annual average growth rate of 14% over the 2000-2016 period and its ratio from 65% to 83%. To understand this evolution, a GVC augmented function of domestic value added in exports is proposed and estimated using panel data of 16 Chinese manufacturing sectors over the 2005-2014 period from OCDE TiVA and WIOD databases. Besides the traditional positive effects of labor productivity, capital intensity and employment on domestic value added in exports, we find that China’s GVC positon improvement through withdrawing backward links and increasing forward links exerted positive effects. The negative elasticity of backward links multiplied by the decreasing share of foreign value added and by its indirect productivity effect contributed to increase Chinese domestic value added in exports. This contribution is 3.5 times higher than that of GVC forward links, measured as the product of the positive elasticity of forward links multiplied by the increasings hare of exports of intermediate goods embodied to exports of third countries. This successful moving up from low cost labor-intensive processing and assembly to relatively higher value-added intermediated goods decreased the risk of being stuck in low-value-added tasks, while the future one should be much more complicated in the context of increasing trade protectionism.

Keywords: China, domestic value added,global value chains

JEL: F15, F41, F62

To cite this article:

Ping HUA (2022). How did China Rise its Manufacturing Domestic Value added in Exports through GVC Moving up? Asian Journal of Economics and Business, Vol. 3, No. 1, pp. 15- 35.

The empirical literature on the effects of monetary policy and fiscal policy on economic activity, has not received much attention. Although a lot has been published on how fiscal policy impacts on economic activity in developed countries and emerging economies, little has been done on developing countries. This paper examines the effects of a government expenditure shock and tax revenue shock on real Gross Domestic Product (GDP), inflation and real interest rate by applying a Vector Autoregression (VAR) methodology to Sri Lankan data. We found that the impact of fiscal shocks on macroeconomic variables is medium-sized and the fiscal multipliers are moderate. A shock to government expenditure has significant effects on economic activity while a shock to tax revenue wields negligible effects on all the variables. Hence, government revenue does not have a more influential role than government expenditure on controlling the economy in Sri Lanka.

Keywords: fiscal policy, government expenditure shock, tax revenue shock, impulse response function, VAR model.

JEL classification: E62; H30; C32 JEL: F15, F41, F62

To cite this article:

Rajakaruna, I., & Perera, N. (2022). The Effects of Fiscal Policy in Sri Lanka: Evidence from a VAR Model Asian Journal of Economics and Business, Vol. 3, No. 1, pp. 37-59.

According to the conventional Mundell-Fleming model (Romer, 2006; Mankiw, 2019), under a floating exchange rate regime, fiscal expansion does not affect output and causes real appreciation whereas monetary expansion raises output and results in real depreciation. Applying an extended IS-LM model to Romania, this paper finds that fiscal expansionreduces output and causes real appreciation and that monetary expansion increases output and leads to real depreciation. Besides, a higher real interest rate, a higher real oil price or a higher expected inflation rate reduces output; and a higher real interest rate or a higherexpected inflation rate results in real depreciation. Hence, except for the negative impact of fiscal expansion on output, the predictions of the Mundell-Fleming model are applicable to Romania.

Keywords: Mundell-Fleming model,monetary policy, fiscal policy,exchange rates.

JEL Classification: E52, E62, F41

To cite this article:

Hsingh, Yu (2022). A Simultaneous Equation Model of Output and Exchange Rate Determination for Romania. Asian Journal of Economics and Business, Vol. 3, No. 1, pp. 61-70.

In the context of surging public expenditure and crumbling output growth, the growth effects of public expenditure have provoked an extensive discussion in the economic and political arenas in Sri Lanka. Since 1977, both public expenditure and its composition have changed intensely and largely been accompanied by expansion in size of successive governments. Although it is difficult to determine whether Sri Lanka has reached its optimal size of public expenditure, understanding the growth effects of public expenditure would clearly link policy contributions made by public expenditure in spurring growth in Sri Lanka. The purpose of this study is to examine the growth effects of composition of public expenditure considering full implications of government budget constraints. This study considers public expenditure at a disaggregated level to isolate productive elements of public expenditure from the total. Accordingly, public expenditure on education, health, defence, agriculture and transport and communication are considered. These expenditure items are selected based on their share in total expenditure. This study found that the growth effects of public expenditure vary at disaggregated levels. A major finding showed that public expenditure in education, agriculture, transport and communication sectors is positively and significantly associated with economic growth while defence and health expenditure do not have any significant impact on growth. Given the high magnitude of positive and significant growth effects of public expenditure in the education sector, this study suggests reforming public expenditure in favour of human capital development is paramount to stimulate long-term growth in Sri Lanka.

Keywords: Public Expenditure, Economic Growth, Government Budget JEL Classification: H50, O40, H60

JEL: F15, F41, F62

To cite this article:

Kesavarajah, M. (2022). Does Composition of Public Expenditure Matter for Economic Growth? Lessons from Sri Lanka. Asian Journal of Economics and Business, Vol. 3, No. 1, pp. 71-98.

The Korean government supported large conglomerates called chaebols during the period of rapid economic growth. Despite the rapid economic growth, structural problems such as the imbalance between chaebols and small- and medium-sized (SMEs) enterprises intensified. From the 1980s the government began to take concrete SME promotion measures. Consequently, the proportion of SMEs in the Korean economy began to increase.The government’s current SME promotion measures comprise financial and tax incentives as well as new industrial policy measures. Korea’s experience provides important policy implications to developing countries thattry to achieve rapid economic growth and structural development.

Keywords: Keywords: small- and mediumsized enterprises, economic development, Korea.

To cite this article:

Ji-On Ryu and Jai S. Mah (2022). Small-and Medium-Sized Enterprises Promotion Policy and Economic Development of Korea. Asian Journal of Economics and Business, Vol. 3, No. 1, pp. 99-117.

In recent years, China has been a major force driving the global economic growth. However, China’s economic growth in the future faces macroeconomic, social, and ecological challenges. This paper studies the sustainability of Chinas development by evaluating the empirical relationship between household consumption, labor income share, and carbon dioxide emissions using provincial-level data from 1995 to 2017. We find that labor income share has positive and significant impact on household consumption share. Both household consumption share and labor income share have negative and significant impact on emission intensity of GDP. Household consumption share and labor income share influence emission intensity through their impact on the industrial structure. These findings suggest that higher labor income share may help China to simultaneously address macroeconomic, social, and ecological challenges.

Keywords: Chinese Economy, Sustainability, Household Consumption, Labor Income, Carbon Dioxide Emissions

To cite this article:

Minqi Li & Han Cheng (2022). Higher Labor Income Can Help China Meet Macroeconomic, Social and Ecological Challenges: Consumption, Labor Income and Emissions in China’s Provinces, 1995-2017. Asian Journal of Economics and Business, Vol. 3, No. 1, pp. 119-141.

We analyze the nexus between human resources and disasters in China using a comparative approach. Two types of disaster damages to human resources used in this research comprise the number of deaths (mortalities) and the number of people affected (affected people). We first compare the effects among six Administrative Regions in China. The results show that the effects of mortalities are mostly adverse and statistically significant. However, the impacts of affected people differ for different economic regions depending on the region’s developmental level. We then compare China with the other East Asian nations: Japan, Mongolia, and South Korea. The paper examines three main sectors: primary, secondary, and tertiary. The results show that Mongolia suffers the most damages, China the second, whereas Japan and South Korea take a turn in the third and the fourth place depending on the sectors.

Keywords: Human resources, disasters, comparative study, China.

To cite this article:

Tien, H., Vu, T. (2022). Human Resources and Disasters in China: A Comparative Study. Asian Journal of Economics and Business, Vol. 3, No. 1, pp. 143-157.

The production and processing of primary products have been the foundation of the China economy for 150 years. However, the economic benefit gained from the primary industries has come with associated environmental costs. These costs must be tackled by industry and farmers for four key reasons: (i) to prepare for the risk of regulation; (ii) to better manage resources; (iii) to increase competitiveness; and (iv) to respond to shifts in consumer preferences. Providing the necessary data to measure and understand the source and extent of environmental impacts is the first stage in addressing these costs. This assessment needs to be comprehensive and cover not only the direct impacts of an operation but also the indirect impacts downstream in the supply chain.

The producer-centric approach is the prevalent way of viewing environmental pressures from production. However, consumption decisions also have an influence on environmental outcomes. While industry and farmers need to be aware of impacts on the environment from production, more information on how expenditure decisions by consumers have indirect impacts on the environment is needed as well. How this responsibility is best apportioned between producers and consumers is also an area of interest.

This study uses new environmentally extended input–output analysis to report global warming potential in China. The first section of the paper presents the environmental pressures from a production perspective. The second section assigns environmental pressures to the final consumption categories: China households and the rest of the world. The final section applies the method recently described by Lenzen and colleagues to apportion responsibility for global warming potential between consumers and producers.

The significance of the primary industries considered in this analysis can be seen from the fact that together they appropriated approximately 46% of the nation’s total global warming potential.

To cite this article:

Kumar, M., & Kalra, D. (2022). The New Environmentally Extended Input-Output Analysis to Measure Global Warming Potential in China. Asian Journal of Economics and Business, Vol. 3, No. 1, pp. 159-180.

Due to the process of the international fragmentation of production, the outsourcing of production has been implemented by most multinational companies; wage disparities between highly-skilled and less-skilled workers are likely to rise, causing income inequality to rise. In fact, since the late 1980s, the unequal income distribution among the Taiwanese has started to worsen. Taiwans experience has revealed that the relationship between economic growth and income distribution has failed to support the inverted U-shaped Kuznets curve. In many cases, the fruits of economic growth are only enjoyed by capital owners and skilled workers in the high-tech sectors, and not by unskilled workers. Of late, Taiwan’s labor market has been marred by persistently stagnant growth in wages, high unemployment and even higher youth joblessness. High and persistent unemployment is likely to increase fiscal burden through higher social welfare spending. A higher fiscal burden will in turn jeopardize future economic growth capacities. Rising unemployment rate for graduate degree holders is a result of the widening gap between their graduate training and the demands of the business world.

Keywords: globalization; income inequality; youth unemployment; social welfare spending;labor share

JEL Codes: D30; D63; F60; O53

To cite this article:

Chien-Hsun Chen (2022). The Impact of Globalization on Income Equality and Youth Employment: Evidence from Taiwan. Asian Journal of Economics and Business, Vol. 3, No. 1, pp. 181-203.