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Political economy of trade protection in commodity markets: A theoretical perspective

Jagath Dissanayke
Discussant: Ariun-Erdene Bayarjargal
We study the implications of reference dependency and loss aversion features of individual preferences in trade policy determination and show these behavioral features help explain why governments change the trade restrictiveness in order to cushion the domestic prices from world price shocks. We show this change comes irrespective of special interest groups lobby the government or not. Using a global dataset on agricultural distortions, we find empirical evidence is not inconsistent with this evidence.

Jagath Dissanayke is a third year economics PhD student at the Australian National University. His research focuses on transmission of commodity prices from international markets to domestic markets.


On estimation of agricultural price transmission elasticity

Jagath Dissanayke
Discussant: Yessi Valida
A voluminous literature estimates price transmission from world markets to domestic markets ignoring unobserved common factors that affect all domestic markets. In this paper, we reconsider the long-run and short-run transmission elasticity of world commodity price shocks to domestic markets using a ‘common factor framework’ that takes into consideration common factors that are correlated with regressors. Use is made of a panel of rice, wheat and maize price data for developed and developing countries observed over the period of 1960-2007. We compare results from a common factor framework to those that do not account for common factors. The findings suggest ignorance of common factors is likely to result in upwardly biased elasticity estimates.

Jagath Dissanayke is a third year economics PhD student at the Australian National University. His research focuses on transmission of commodity prices from international markets to domestic markets.


Mining, deaths, and dropouts

Ryan Edwards
Discussant: Kimlong Chheng

I estimate the impacts of mining on key health and education indicators across a large sample of countries, addressing endogeneity and country-specific factors. The mining sector can explain substantial cross-country variation in health and education outcomes over the last few decades, with an increase in mining income per capita found to be of net harm to health and education outcomes, on average. Doubling the mining share of an economy corresponds to an infant death rate being 11 per cent higher, secondary school completion being 23 per cent lower, and 75 per cent more people with no schooling, over the long run. The most likely channels for these effects are directly through decreased investment in human capital and indirectly through deteriorating institutions – political, social, economic and public.

Ryan Edwards is a PhD candidate in the Arndt-Corden Department of Economics in the Crawford school, currently conducting empirical research on the impacts of natural resources on social development and poverty, the socioeconomic impacts of migration, and poverty dynamics in the Pacific.He is on leave from the public service and has previously worked in the international development sector for a boutique NGO, the Queensland Government, and the financial services sector.

The impact of a large rice price increase on welfare and poverty in Bangladesh

Syed Hasan
Discussant: Michael Cabalfin
This paper studies the effect of a sharp rice price increase on welfare and poverty in Bangladesh. We employ household expenditure information, which is generally viewed as a more convincing welfare measure than household income, to estimate the welfare loss induced by the price increase. Our findings suggest that we underestimate the proportionate welfare loss for the rice producing households and overestimate that of the households who do not produce rice, if we ignore indirect effects arising from a change in household consumption and production behaviour. Our estimates further support the hypothesis of a quadratic relationship between welfare loss and permanent household income. We also demonstrate that higher rice prices either increase or decrease the poverty head-count ratio, depending on the choice of the poverty line. However, if we consider the per capita income gap as a measure of poverty, we always observe that higher rice prices unambiguously increase poverty.

Syed Hasan’s recent research focuses on the impact of rice price increase, and the semiparametric analysis of Engel curve and equivalence scales in Bangladesh. His scholarly interests also include welfare, poverty and food policy.

Does humanitarian aid crowd out development aid? A dynamic panel data analysis

Delwar Hossain
Discussant: Rajan Krishna Panta
This paper examines whether humanitarian aid crowds out development aid using a newly constructed panel dataset covering 23 OECD-DAC donor countries and 117 aid recipient developing countries over the period of 2000-2011. The econometric analysis is undertaken within the standard gravity modelling framework using Hausman-Taylor instrument variable approach as the preferred estimation method which incorporates both time-varying and time-invariant variables as well as controls for endogeneity. The country programmable aid, which best reflects the actual amount of aid transfer from donors to recipient countries, is used as the proxy for development aid. The findings suggest that humanitarian aid, on average, crowds in, rather than crowds out, development aid to the recipient countries. This inference is robust to alternative system GMM and 2SLS estimations of the model using the estimated loss of natural disaster along with the number of disaster affected people as external instruments for humanitarian aid in the later approach.

Delwar Hossain's research focuses on the foreign capital and remittance inflows and their impacts on domestic savings in the developing countries; humantarian aid; development aid; and panel data modelling. His areas of research interest also include macroeconometrics, development economics , WTO matters and economic policies.


Profit sharing and bargaining power in iron ore trade

Luke Hurst
Discussant: Jiao Wang
This paper uses an augmented bilateral monopoly (BM) framework of trade and export price bargaining in bulk commodities to analyse how quasi-profits arising from Australia’s geographic closeness to China—relative to other major iron ore exporters—are shared under different pricing mechanisms. The paper analyses Chinese steel mills’ bargaining position and the impact of the Chinese state on the annual bargaining pricing mechanism. It also looks at the role of the Chinese state and the financial impact of the transition from the annual benchmark system to the spot market pricing mechanism. The paper finds that the transition from a ‘free on board’ benchmark price to the ‘cost and freight’ spot price has shifted around US$7.1 billion in quasi-profits from Chinese exporters to Australian importers during the April 2010 to December 2011 period.

Luke Hurst is a PhD candidate in economics and the Pacific Trade and Development Fellow at Crawford School of Public Policy, The Australian National University. Luke's research focuses on Chinese overseas direct investment, and the impact of China on the global iron ore market, the latter will be the topic of his PhD thesis. His recent publications look at Australia's investment policy and the Australian-Chinese investment relationship; China's future resource demand; and Africa's iron ore supply potential and its impact on the global market.


Economic impacts of extreme weather events on farm households: Evidence from Thailand

Sirikarn Lertamphainont
Discussant: Jagath Dissanayke

This study investigates the impacts of extreme rainfall shocks on farm households’ welfare in Thailand using unique nationwide repeated cross-sectional farm household survey data, available annually from 2006 to 2010. Exogenous provincial measures of rainfall shocks are constructed from daily and monthly rainfall data to capture the frequency and intensity of drought and excessive rainfall events during the study period. Controlling for district and time fixed effects as well as key household and farm characteristics, the estimations show significant negative impacts of these extreme weather events on economic income, especially from crop production. Small but significant declines in aggregate consumption in response to these shocks are also evidenced. The effect, however, is less severe relative to that on total income, signalling the existence of some forms of consumption smoothing mechanisms. Participating in non-farm jobs, saving, and stocking of crop, livestock, and assets are found to reduce negative consequences of rainfall shocks. In addition, asset-poor households are found to be more vulnerable to rainfall shocks in relative to the better off households, signifying the evidence of wealth-differentiated access to effective coping strategies among Thai farm households.

Sirikarn is a third year PhD candidate in Economics at the Arndt-Corden Department of Economics whose current research focuses on the potential impacts of extreme weather on the farm households' welfare in Thailand.


Pareto improvements under matching mechanisms in a public good economy

Larry Liu
Discussant: Yingying Lu
Matching mechanisms have been proposed to mitigate underprovision of public goods in voluntary contribution models. This paper investigates Pareto-improving equilibria under various matching schemes with two heterogeneous players of the Cobb-Douglas utility function. The author finds that there is always a neutrality zone within which any endowment distribution would reach the same interior equilibrium, and within the neutrality zone players can always implement some small matching schemes to make them both better off, no matter how heterogeneous they are in the preference. This finding is useful for cooperation, particularly in the context without exact knowledge of individual preferences or at the international level without a central government. Moreover, the Pareto-improving matching scheme can be very flexible. However, pessimistically, if players attach higher weights of value to the private good, the neutrality zone becomes smaller, which requires the endowments of two players must be very close for Pareto-improving matching schemes to exist. Finally, the paper visualizes the neutrality zone and Pareto-improving equilibria in a special Cobb-Douglas example through the Kolm triangle.

Larry Liu is a PhD candidate in Economics in CAMA. His research focuses on environmental economics, particularly on climate change, economic growth and resource exploitation, and game theory on public goods.


Global production sharing: patterns, determinants and macroeconomic implications

Omer Majeed
Discussant: Rajan Krishna Panta
The paper adds to the growing literature of global production sharing. The value added of this paper are three folds: 1) this paper extends existing theories on global production sharing; 2) this paper analyses the impact of macroeconomic variables like technology, institutions and macroeconomic stability on global production sharing - these variables have so far been ignored in the empirical literature on this subject; and 3) compare the determinants of global production sharing with final goods manufacturing exports. This paper finds that institutions, technology and macroeconomic stability play a more prominent role in augmenting global production sharing in both developed and developing countries. In addition, we find that an improvement in technology augments global production sharing more than it augments manufacturing final goods exports.

Omer Majeed's thesis is examining international trade and production fragmentation. Prior to starting his PhD, Omer was a senior economist at Northern Territory Treasury. He holds a Masters and Graduate Diploma in Economics from ANU and a BSc (Hons) from the London School of Economics.


Economic consequences of terrorism: Geography matters

Omer Majeed
Discussant: Ryan Edwards
Terrorism can impose significant costs on an economy. This paper analyses the effect of geography on terrorism. In particular, this paper hypothesizes that a terrorist attack in financial hubs of a country will have significantly higher economic cost than a similar attack in a remote part of the country. In particular, we focus on the case study of Pakistan and Net Foreign Direct Investment (NFDI). We find that terrorism in financial hubs of Pakistan has imposed a significant cost on NFDI, but similar attacks in remote areas have had insignificant impacts. This heterogeneity of the geography of terrorism has long been ignored in the literature, and as such is likely to be a significant contribution.

Omer Majeed's thesis is examining international trade and production fragmentation. Prior to starting his PhD, Omer was a senior economist at Northern Territory Treasury. He holds a Masters and Graduate Diploma in Economics from ANU and a BSc (Hons) from the London School of Economics.


Inward workers’ remittances and real exchange rates in South Asia, 1980 – 2011

Arjuna Mohottola
South Asia continues to attract large inflows for worker’s remittances and its macroeconomic impact over the long time horizon has not yet been properly investigated. This study tested the impact of workers’ remittances on the real effective exchange rate (REER) using a panel of five South Asian countries for the period 1980-2011. Panel estimation was used to assess the impact of remittances on South Asia and their country-specific impacts were, assessed using time series data. The findings indicate that workers’ remittances have had a positive impact in appreciating the REER in South Asia. The results of the country-level analysis differ from the panel data and show that remittances have resulted in a depreciation of Bangladesh’s REER while for India, the world’s largest remittances recipient, remittances have not had a statistically significant impact on the growth of REER. This underscores the need to introduce sound macroeconomic policies ensure that the REER is maintained close to its equilibrium level and it does not appreciate and erode external competitiveness of the South Asian region.

Arjuna Mohottala is a first-year PhD candidate in Economics in CAMA. Prior to starting his PhD, Arjuna completed his Masters and Graduate Diploma in Economics from ANU. Arjuna is a senior economist at the Central Bank of Sri Lanka.


Output composition of monetary policy transmission mechanism: Is Australia different?

Tuan Phan
Discussant: Truong Nguyen

This paper compares the output composition of the monetary policy transmission mechanism in Australia to those for the Euro area and the United States. Four Vector Autoregression (VAR) models are used to estimate the contributions of private consumption and investment to output reactions resulting from nominal interest rate shocks for the period 1982Q3–2007Q4. The results suggest that the investment channel plays a more important role than the consumption channel in Australia, while the contributions of the two channels are indifferent in the Euro area and the U.S. The difference between Australia and the Euro area might come from differences in housing investment responses, whereas Australia is different to the U.S. mainly because it has a lower share of household consumption in total demand.

Tuan Phan is a PhD student in Economics. Tuan's thesis topic is "On impacts of monetary policy". Tuan's panel includes Associate Professor Ippei Fujiwara (Chair), Professor Renee McKibbin, and Dr Paul Burke.


Can environmental regulation enhance productivity?

Akshay Shanker

The famous Porter hypothesis suggests that environmental regulation, in the form of pollution caps or taxes could encourage innovation and subsequently lead to overall increased productivity and competitiveness. A first pass of standard economic theory does not support the Porter hypothesis. If there were opportunities for increased productive innovation, then these would have already been taken up even without environmental policy. This paper re-examines the Porter hypothesis using recently developed theories of Endogenous Growth and Directed Technological Change. The key result is that environmental policy can drive increased longer term economic growth, even without taking into account negative environmental externalities. Rather than market failures, the key mechanisms for this effect are time-preferences and the fact that innovation 'stands on the shoulders of giants'.

Akshay Shanker is a second year economics PhD student at the Australian National University. His research interests include growth theory and technological development.


Environment and Development

Is men’s out-migration empowering women farmers in rural Nepal?

Mohanraj Adhikari
Human migration is a complex phenomenon. Migration does not only occur due to the push and pull factors that exist in the source, the rural villages of Nepal and recipient destinations, urban centres of both Nepal and India. One of the effects of male outmigration is that many families become de facto women-headed households (WHH). In rural areas, WHHs not only are responsible for reproductive duties at home but are taking up farming. Gender-selective migration from rural households throws light not only on the migration process itself, but also on how changing primary farming responsibilities are changing gender roles. Both relate to contemporary agrarian situation in Nepal; if the need for cash incomes is forcing men to leave the farms, the implications of such departures for the future of agriculture are significant. A critical issue that arises relates to women’s empowerment; when left-behind women take up almost all the tasks related to farming, some of which were traditionally masculine activities, what implications such transformed gender roles might have for the empowerment of women? Are women benefitting from their increased participation in farming?

Mohanraj’s recent research focuses on analyzing the impacts of male out-outmigration on the empowerment of women farmers in an attempt to explain the household level food security situation in mountain, hills and plains in Nepal. His scholarly interests also include participatory techniques for poverty monitoring and system level thinking and analysis.


Cooperation, conflict, and complexity; India’s hydro-hegemony in South Asia and the challenges and opportunities for water interactions

Paula Hanasz
Water has been called the next battleground of Asia, yet inter-state water interactions are in reality too complex to categorise into the false dichotomy of conflict and cooperation. The concepts of water conflict and water (in-)security have manifold manifestations, and cooperation almost always co-exists with conflict in hydropolitics. Water security is also a non-traditional security threat that requires collective action. At the same time, transboundary water management is a wicked problem, and subject to the complex interdependencies that power asymmetry creates. The water interactions between the hydro-hegemon India and its co-riparians serve to illustrate these points. There are uncertain times for transboundary water management in South Asia. The policy challenge remains to shift narratives that perpetuate adversarial approaches and to develop meaningful multilateralism.

Paula is researching the effects of power asymmetry on transboundary water interactions in South Asia. Her academic interests include resource politics, non-traditional security threats, hydro-hegemony and development.


Can deforestation emissions be reduced in countries with profoundly compromised political systems? The case of Indonesia.

Erik Olbrei
Tropical forests contribute around 12% of global emissions. Therefore a major effort is under way in the UNFCCC and elsewhere to develop strategies to reduce emissions from deforestation and forest degradation (REDD). But much of this thinking overlooks political economy problems of corruption and illegality typically found in the forest sectors of tropical developing countries. In the Indonesian case, these problems derive mainly from the legacy of Suharto’s New Order period, when oligarchical patterns of control of Indonesia’s natural resources were embedded. This doctoral research is based on an analysis of the patterns of corruption, collusion and nepotism in Indonesia’s forest sector. From that starting point, it will examine several initiatives aimed at reducing deforestation, exploring whether and how Indonesia can succeed in reducing deforestation and forest emissions in the face of a profoundly compromised political system.

Erik Olbrei is undertaking doctoral research on climate change with the Crawford School of Public Policy at the ANU. Prior to joining the ANU he spent around 20 years in international development with AusAID, and several years working on water reform issues at the National Water Commission.


What pathways can lift the rural poor out of poverty? A case from rural Nepal

Ramesh Sunam
Reducing rural poverty continues to be a key challenge for many developing countries. In the last few decades, rural poverty has undergone profound changes in its forms and extent because of global and local socio-economic forces. This paper, therefore, seeks to examine pathways leading to poverty dynamics in rural Nepal which has experienced marked socio-economic changes triggered by foreign labour migration and other local factors. It is argued that foreign labour migration and access to land define the movement of most households out of poverty. Similarly, some households were also drawn into poverty because of loss of access to land or forests, cultural burdens and health costs.

Ramesh’s research interest includes poverty, migration and food security in the Global South. His thesis investigates pathways out of poverty in Nepal with a particular focus on the processes and mechanisms leading to poverty dynamics.


Policy and Governance (POGO)

Impact of network relationships on network outcomes in privatised sanitation systems

Ally Adigue
The promise of privatisation to expand service coverage and lower costs of water and sanitation services in the developing world failed to deliver. Much has been written on evaluating the outcomes of privatisation in developing economies but the existing literature only created a puzzle as the variegated approaches employed to analyse outcomes offered conflicting and inconclusive results. Departing from the current and more popular theories employed to evaluate privatisation outcomes which mainly shows an abundance in capacity for policy analysis in privatisation, this research aims to contribute to the seemingly underdeveloped literature on administrative analysis of privatisation by employing the more nascent network theory in privatisation to explain why networks matter to the performance and outcomes of privatised water and sanitation systems.

Ally Adigue is second year PhD student at the Crawford School of Public Policy. In her previous life, Ally has worked in both the public and private sectors, the non-government sector and the academe. In the past 10 years, Ally has lived in 4 countries across 3 continents. When she’s not busy moving countries and jobs, and recovering from sports injuries, Ally tries to save the world in her own little way.

Trend of utility affordability and impacts of State utility concessions in Victoria

Noel Wai Wah Chan
With increasing water and energy prices faster than the CPI over the 15 years, the costs of living associated to the essential utility services have become a significant concern in Australia. Unlike in the UK, there is no comprehensive utility affordability indicators and benchmarks to assist the development of target strategies in water and energy affordability problem in Australia. Generally utility assistances are provided by the State governments in the form of water and energy concessions to eligible households. In most cases, eligibilities are based on the possession of certain Commonwealth concession cards. By analysing the utility consumption surveys conducted by the Victorian State Government in 2001 and 2007, this paper applied the traditional affordability ratio method to identify the characteristics of households who are vulnerable to water and energy affordability stress. I also evaluate the impacts and effectiveness of the State utility concession policy. This presentation is the preliminary results of the analysis.

Noel Chan is a PhD candidate in Public Policy at the Crawford School. Her recent research interest is focusing on water and energy pricing impacts on residential customers and relevant customers’ hardship and social policies. Noel completed her Master degree in Environmental and Resources Economics at Crawford School in 2007. Her previous research included the conservation and analysis of live reef fish trade and shark fin trade in Hong Kong as well as other environmental and development issues in Hong Kong and China.


Realism meets nation building: The U.S. policy elite’s critique of U.S. foreign policy in Pakistan

Alicia Mollaun
Post-9/11, ‘nation building’ has become a popular mantra for aid and foreign policy in the United States. But how to go about nation building in a context where one also has traditional, realistic foreign policy objectives, such as in Pakistan? This is a research question that has been little investigated. The Obama Administration publically emphasises its nation building goals in Pakistan, while still pursuing though more quietly its security-related aims. This research, which is part of a broader project examining elite U.S. and Pakistani views of U.S. foreign policy and aid to Pakistan, assesses the views of the U.S. policy elite in relation to U.S. foreign policy to Pakistan, and analyses their responses in terms of the competing frames of nation-building and realist foreign policy. Interviews with the U.S. policy elite show that they perceive realist objectives as dominating U.S. foreign policy, even though they perceive Pakistan’s most serious challenges to be internal. Not surprisingly, many in the elite are deeply dissatisfied with U.S. policy to Pakistan and call for a re-set in the relationship. The paper illustrates the difficulties of reconciling nation-building and realist foreign policy objectives, and the dissatisfaction that an attempt to combine both will bring.

Alicia Mollaun is public policy PhD candidate in her third year and her research looks at U.S. and Pakistan elite perceptions of U.S. aid to Pakistan in the post 9/11 period. Alicia is based in Islamabad, Pakistan and has lived there since mid-2010. Alicia has worked at the Department of the Prime Minister and Cabinet, the Deputy Prime Minister's Office, and the Department of Foreign Affairs and Trade. alicia.mollaun@anu.edu.au.


Social capital and election campaign participation in Australia

Jillian Sheppard
Data from the 2010 Australian Election Study show that citizens from non-English speaking backgrounds (NESB) are disproportionately likely to contribute time and money to political parties and candidates. This study examines the processes by which immigrants are recruited into party politics in Australia. It hypothesises that strong interpersonal networks and measures of social capital among immigrants from NESB make them more likely to participate in campaigns than Australian-born citizens. Ordinary least squares and binary regression analyses explore the factors affecting campaign participation. Data come from the Australian Election Study and World Values Survey. The study contributes to the understanding of political participation in Australia generally and the civic engagement of immigrants from NESB. The results provide important knowledge on how parties and candidates recruit volunteers and supporters in Australia.

Jill Sheppard is a PhD candidate in the School of Politics and International Relations at ANU. She is interested in political behaviour, particularly participation and public opinion. Her thesis focuses on the role of the internet in political participation in Australia. Before starting her PhD in 2011, Jill worked as an advisor to Australian politicians, in Cabinet and on the backbench.