In Indonesia, more than 30% of children under the age of 5 years suffer from chronic malnourishment. The long-term consequences of childhood malnutrition are well established in the literature. Yet, little is known about the extent to which these children are able to recover from some of the long-term deficits in health outcomes caused by childhood undernourishment. To capture the association between nutritional deficiency at young ages and subsequent health status, a panel data is constructed using observations on children between the age of 3 and 59 months in 1993 who are followed through the 1997 and 2000 waves of the Indonesian Family Life Survey. A dynamic conditional health demand function is estimated, where the coefficient on the one-period lagged health status captures the extent of recovery, if any, from childhood malnutrition. This coefficient is also known as the ‘catch-up’ term. … [A] coefficient of 0.23 estimated here indicates that by adolescence, a malnourished child will grow to be only 0.95 cm shorter than a well-nourished child…

That is Subha Mani of the University of Southern California in a recent job market paper. She concludes “poor nutrition at young ages will cause some, but not severe, retardation in the growth of future height indicating partial catch-up effects”.

Once centimeter is still pretty large, I think. Besides, she also calculates that malnourished child will also have 0.6 less year of schooling.

Thanks to Arya Gaduh for the pointer.

Using dynamic panel data models, we examine the effect of capital requirement on banks’ behavior in Indonesia. We find inconclusive results. Banks tend to comply with capital requirement: They increase their capital ratio when their CAR is lower than, or falling towards, the eight percent regulatory minimum. However, most of our results are statistically significant at 20-30% level of significance only. Moreover, our results are mostly driven by private domestic banks and heavily-undercapitalized banks that were closely monitored by regulator in the aftermath of the 1998 crisis. Whether, in normal circumstances, banks in developing countries like Indonesia comply with capital requirement, therefore, remains questionable.

That’s from another recent working paper by Parinduri and Riyanto. Comments and suggestions are welcome.

We examine the effect of strategic sale—the sale of banks to strategic foreign investors—on banks’ performance. The Government of Indonesia implemented such a policy as a part of bank restructuring in the aftermath of the 1998 banking crisis. Using difference-in-difference models, we find that strategic sale leads to 12%-15% cost reduction. These results are robust to the use of other estimators such as difference-in-difference matching-estimators and stochastic-frontier analysis, to that of other performance measures such as return on assets and net interest margin, and also to that of different types of samples. These suggest that strategic sale could play an important role in restructuring troubled banks in developing countries.

In short, the sale of Indonesian banks to strategic foreign investors a couple of years ago is a good thing.

That’s from a recent working paper by Parinduri and Riyanto.

In short, as Indonesia’s economy grows, the rich do get richer. But so do the poor.

Income Share of the Top 10% in Indonesia (Figure 2 in the paper)

Hence, in the last two decades, the income share of the 10 percent richest remains pretty much the same, in the 35%-40% range.