ACHIEVING INCLUSIVE GROWTH IN THE ASIA PACIFIC ACHIEVING INCLUSIVE GROWTH IN THE ASIA PACIFIC EDITED BY ADAM TRIGGS AND SHUJIRO URATA Pacific Trade and Development Conference Series (PAFTAD) Published by ANU Press The Australian National University Acton ACT 2601, Australia Email: [email protected] Available to download for free at press.anu.edu.au ISBN (print): 9781760463816 ISBN (online): 9781760463823 WorldCat (print): 1159740071 WorldCat (online): 1159739893 DOI: 10.22459/AIGAP.2020 This title is published under a Creative Commons Attribution-NonCommercial- NoDerivatives 4.0 International (CC BY-NC-ND 4.0). The full licence terms are available at creativecommons.org/licenses/by-nc-nd/4.0/legalcode Cover design and layout by ANU Press This edition © 2020 ANU Press CONTENTS Figures . vii Tables . .. xiii Contributors . xv Abbreviations . xvii Preface . xxi 1 . Introduction . 1 Adam Triggs and Shujiro Urata 2 . Economic theory and practical lessons for measuring equality of opportunity in the Asia–Pacific region . 21 Miles Corak 3 . Measuring wealth: Implications for sustainable development . 41 Kevin J Mumford 4 . Rising inequality amid rapid growth in Asia and implications for policy . 55 Juzhong Zhuang 5 . Openness and inclusive growth in South-East Asia . 87 Aekapol Chongvilaivan 6 . Automation, the future of work and income inequality in the Asia–Pacific region . 103 Yixiao Zhou 7 . History returns: Intergenerational mobility of education in China in 1930–2010 . 151 Yang Yao and Zhi-An Hu 8 . Inequality and intergenerational mobility in India . 169 Himanshu 9 . Intergenerational equity under increasing longevity . 207 Sumio Saruyama, Saeko Maeda, Ryo Hasumi and Kazuki Kuroiwa 10 . Female labour force participation in Indonesia: Why has it stalled? . 241 Lisa Cameron, Diana Contreras Suarez and William Rowell 11 . Conclusion . 279 Adam Triggs and Shujiro Urata FIGURES Figure 1.1. Christoph Lakner and Branko Milanovic’s ‘Elephant chart’ ......................................3 Figure 2.1. Seventeen Asia–Pacific countries ranked according to World Bank estimates of intergenerational earnings elasticity ...25 Figure 2.2. Intergenerational education transmission (extra years of education for each extra year of parent education). The intergenerational transmission of earnings is positively correlated with the intergenerational transmission of education among 15 Asia–Pacific countries ........................31 Figure 2.3. Proficiency in mathematics among 14-year-olds in the United States is much higher for children with better educated parents ....................................34 Figure 2.4. Roemer’s equality-of-opportunity framework suggests organising test scores as cumulative distribution functions by family background, with achievement differences of similarly ranked students across groups indicating inequality of opportunity among Grade 8 students in the United States .....36 Figure 2.5. Roemer’s equality-of-opportunity framework suggests organising test scores as cumulative distribution functions by family background, with achievement differences of similarly ranked students across groups indicating inequality of opportunity among Grade 8 and Kindergarten students in the United States ..................................37 Figure 4.1. Annual GDP growth and cumulative poverty reduction ..57 Figure 4.2. Gini coefficient, selected Asian economies, 1990s and 2013 or latest ..............................58 vii ACHIEVING INCLUSIVE GROWTH IN THE ASIA PACIFIC Figure 4.3. Income inequality decomposition by educational attainment. 66 Figure 4.4. Share of labour income in industrial value added, selected Asian economies ..............................68 Figure 4.5. Income inequality decomposition, urban/rural .........70 Figure 4.6. Urban–rural income gaps in selected Asian economies, 1990s−2010s .......................................71 Figure 4.7. Inequalities in provincial per capita incomes in selected Asian economies, 1990−2010. 72 Figure 4.8. Income inequality decomposition, province/region ......73 Figure 4.9. Combined contribution of spatial inequality to overall inequality in selected Asian countries .....................74 Figure 4.10. Gini coefficient of per capita net household wealth, PRC, 1988–2012. .75 Figure 5.1. Gini coefficients and poverty headcount ratios in South-East Asia (per cent) ...........................91 Figure 5.2. Income inequality and trade openness in South-East Asia ...................................93 Figure 5.3. Income inequality and financial sector development in South-East Asia ...................................95 Figure 6.1. Total factor productivity, 1970–2014 (United States, United Kingdom, Australia and the OECD average) ........105 Figure 6.2. Total factor productivity, 1970–2014 (selected economies in the Asia–Pacific region) ............................105 Figure 6.3. Industrial revolutions in history ...................108 Figure 6.4. Price index of gross fixed capital formation in computing equipment (2010 = 100) .............................112 Figure 6.5. Estimated annual shipments of industrial robots by regions. 113 Figure 6.6. Annual supply of industrial robots in the 15 largest markets in 2016. .113 viii FIGURES Figure 6.7. Dependency ratios in selected Asian economies, defined as population aged 65 and older as a share of population aged 15 to 64, 1950–2100. .117 Figure 6.8. Dependency ratios in selected Asian economies, defined as population aged below 14 as a share of population aged 15 to 64, 1950–2100. .117 Figure 6.9. Minimum wages in selected countries divided by the minimum wage in China (2004–13) ....................118 Figure 6.10. Ratios of labour productivity (real output per worker) in selected countries over labour productivity in China ......120 Figure 6.11. Percentage changes in US mean real income from the level in 1991, males above 25 years old (1991–2015) .....122 Figure 6.12. Changes in real hourly wages in China by skill level, constant 1995 yuan, 1995–2009 .......................122 Figure 6.13. Gini coefficient pre-tax and pre-transfer and Gini coefficient post-tax and post-transfer in selected economies in the Asia–Pacific region .............................123 Figure 6.14. Fixed broadband subscriptions (per 100 people) ......134 Figure 6.15. Mobile cellular subscriptions (per 100 people) .......135 Figure 6.16. 2017 Global Connectivity Index .................135 Figure 6.17. Networked Readiness Index .....................136 Figure 6.18. Share of real investment in ICT capital in the total capital in selected economies ..........................138 Figure 6.19. Research and development expenditure (% of GDP) in selected countries from 1996 to 2015 .................139 Figure 7.1. Education trend: Full sample .....................153 Figure 7.2. Education trend by gender .......................155 Figure 7.3. Transmission coefficient: Full sample ...............157 Figure 7.4. Transmission by cohorts .........................158 Figure 7.5. Transmission coefficient by gender .................159 Figure 7.6. Education trend by Hukou .......................161 Figure 7.7. Transmission coefficient by Hukou .................162 ix ACHIEVING INCLUSIVE GROWTH IN THE ASIA PACIFIC Figure 7.8. An illustration of decomposition ..................163 Figure 7.9. Decomposition of transmission coefficient ...........164 Figure 8.1. Gini coefficient of consumption expenditure (NSSO) ..174 Figure 8.2.1. Growth rate of real MPCE by MPCE deciles (rural) ..176 Figure 8.2.2. Growth rate of real MPCE by MPCE deciles (urban) . 176 Figure 8.3. Index of MPCE by groups (1983=100) .............177 Figure 8.4. Income inequality (IHDS) .......................179 Figure 8.5. Gini coefficient of wealth (AIDIS) .................182 Figure 8.6. Inequality in Palanpur ..........................184 Figure 8.7. Growth rate in the agricultural and non-agricultural sectors (constant 2004–05 prices) ......................186 Figure 8.8. Number of workers .............................187 Figure 8.9. Percentage of informal workers by type of employment ...188 Figure 8.10. Workers’ wages and managerial emoluments in organised manufacturing ...........................190 Figure 8.11. Share of profits and wages out of net value added (NVA) in organised manufacturing (ASI) .................191 Figure 8.12. Real wages of unskilled labour, 2011–12 prices. 192 Figure 9.1. Ratio of the elderly in the population ...............208 Figure 9.2. Best-practice life expectancy ......................208 Figure 9.3. The ratio and life expectancy of the elderly in Asian countries .........................................212 Figure 9.4. Benefits and payments by generations and government finance. 213 Figure 9.5. Discount rates ................................218 Figure 9.6. Expected lifespan of each cohort (median) ...........222 Figure 9.7. Consumption and generational accounting ..........223 Figure 9.8.1. Components of generational accounting – benefits ...225 Figure 9.8.2. Components of generational accounting – payments ..226 Figure 9.9. Macro-economic indicators ......................227 x FIGURES Figure 9.10. Lifetime consumption Ĉi and its increase from longevity ΔC1 (millions of yen, 2011 prices) ......................228 Figure 9.11. Assumption of extended retirement ...............230 Figure 9.12. Effects of retirement extended by 10 years (millions of yen, 2011 prices) ..........................232 Figure 9.13. Effects of retirement extended by five years (millions of yen, 2011 prices)