US economic assistance to two Micronesian nations: Aid impact,dependency and migration

Abstract: The USA provides economic assistance to the Federated States of Micronesia and the Republic of the Marshall Islands under the Compacts of Free Association. Both economies demonstrate three of the four MIRAB components: migration, aid and bureaucracy. Only the remittance structure has not developed. Significant US assistance supported large government sectors in both nations. Reductions in US assistance of over a 17‐year period led many island citizens to migrate to the USA. However, to date, remittances have not been substantial. In addition to structural challenges, both nations face institutional constraints including poor governance and lack of accountability over assistance. To improve future growth through more effective use of US assistance, these institutional constraints must be overcome. Future US assistance to both nations will fall over the next 20 years, putting pressure on the island governments and will likely contract their economies. The need for remittance streams is likely to increase. New Compact assistance structures strive to improve aid accountability.     

Breaking out of the MIRAB mould: historical evidence from Norfolk Island

The MIRAB model offers an explanation of the evolution and operation of some tiny Pacific island economies. Proponents of the model have argued that it describes an economic system that is durable and persistent. Using an historical approach, this paper explores whether and how an economy of the MIRAB type can break out of its structural mould without regressing to an earlier stage of development. After establishing that Norfolk Island possessed strong MIRAB characteristics from the end of World War II until the early 1960s, the paper analyses the tourism-dominated economic growth that erased these characteristics, or at least reduced them to insignificance. It concludes that the island has achieved a sustained break-out from the MIRAB mould, although not without incurring some social costs.     

Introduction: The MIRAB model in the twenty‐first century

Abstract: The papers collected in this volume were originally presented at a conference in February 2004, on the theme ‘Beyond MIRAB: The Political Economy of Small Islands in the Twenty‐First Century’. Several of the papers in the collection point towards the emergence of a new three‐way taxonomy of small‐island socioeconomic formations, comprising MIRAB, PROFIT and SITE ideal‐types. The key economic flows in the first are remittances and aid; in the second, jurisdictionally‐related flows such as tax‐haven and money‐laundering transactions; and in the third, tourism revenues. All three ideal‐types correspond to potentially sustainable temporary equilibria, but in all cases the existing set‐up is path‐dependent, and subject to regime switch if disturbed. Conceptualisation of the small‐island world as a field of multiple equilibria and path dependence points to the future importance of event studies by island researchers. The collection includes also new research on the theory of remittances, and case studies of the MIRAB process and the transnational migrant diaspora.     

Occupation‐specific analysis of migration and remittance behaviour: Pacific Island nurses in Australia and New Zealand

Abstract: Most previous empirical studies of migration and remittances ignored possible differences among occupational categories of migrants. Where human capital investment decisions and occupational choices are influenced by perceived prospects for international migration, internationally tradable occupations such as nursing are likely to attract individuals with particular attributes and with a stronger propensity to migrate. We argue that this can also affect the remittance behaviour of such occupational groups, pointing to the need for a disaggregated analysis by occupational category. This paper reports the results of a recent survey of nurses in Fiji, Tonga and Samoa, and nurse migrants from the same countries in Australia and New Zealand. We also report the findings from a re‐analysis of earlier remittance data from Tongan and Samoan migrants in Australia. Nurse household remittance behaviour is statistically different from others, with nurses remitting more generously and consistently over time. The reasons and implications are explored. The impact and volume of nurse remittances emphasise the sustainability of the migration, remittances, aid and bureaucracy (MIRAB) system.     

SITEs revisited: Socioeconomic and demographic contours of small island tourist economies

This study attempts to do three things: (i) provide a review of recent advances in the small island economy literature using the tourism penetration index, (ii) update the impact of tourism across the same global sample of 36 small islands (less than 1 million in population and 5000 km² in area) introduced in APV 47 (1) 2006, and (iii) employing an abbreviated version of the destination life cycle as a development paradigm, construct three different socioeconomic and demographic profiles based on low, intermediate and high tourism impact. Results using cross‐sectional data of 27 indicators reveal three statistically distinct profiles that demonstrate three stages of economic development. Specifically, the findings contrast the low‐income, labour‐exporting, least tourism‐penetrated MIRAB‐type (Migrant/Remittances and Aid/Bureaucracy) emerging islands with their more advanced intermediate impact neighbours. In turn, the latter fall at a significant distance from the most successful s mall i sland t ourist e conomy (SITE) destinations. Thus, this study further refines the characteristics of SITE islands and confirms the viability of tourism in general and the destination life cycle in particular as an effective engine and model, respectively, of island development.     

Hurricanes and socio‐economic development on Niue Island

This case study investigates the complex ways that recurrent ecological damage affected the course of socio‐economic development on Niue Island, a Pacific micro‐state. In tracing the historical record of droughts and hurricanes from 1900 to 1990, it is clear that severely inclement weather repeatedly destroyed agricultural development endeavours on the island leading to stagnation in this economic sector. In the aftermath of such disasters there were additional widespread social, political, and economic responses resulting in insidious but inexorable change. These responses – metaphoric ‘winds of change’– constituted, bolstered and sustained the transition to a MIRAB economy.     

Openings in the body of ‘capitalism’: Capital flows and diverse economic possibilities in Kiribati

Much of the post‐development agenda is concerned with decoupling Eurocentric imaginings of development from development practices in ‘remote’ regions and exploring new forms of economy that can enhance local well‐being. In the South Pacific (and elsewhere), small peripheral economies have confronted globalisation in varying ways. Some places, such as the Micronesian island state of Kiribati, have engaged directly with the global economy by investing capital generated locally in international financial markets rather than in domestic industries. Kiribati's trust fund, the Revenue Equalisation Reserve Fund, maintains a balanced portfolio of international equity and fixed income assets that produces a financial return, helping to augment Kiribati's other national income sources. In this paper we explore the results of capital flowing from Kiribati to global financial markets, noting that this alternative development practice can enhance local well‐being.     

Remittances sent by a growing altruistic diaspora: How do they grow over time?

Abstract: This paper investigates theoretically the time pattern of remittances sent home by a growing diaspora of emigrants who are motivated by altruism rather than pure self‐interest. Migrants are assumed to care about the consumption of home‐resident family members as well as their own welfare. Hence, remittance effort will depend upon the ratios of per capita income and income growth rates between the host country and the home country. Effort will depend also on the number of emigrants sending back remittances to each home‐resident household. In general, the effect of remittances is to sustain growth of consumption per capita in the home country above the growth rate of per capita GDP. A priori, there is no necessary tendency for remittance effort to rise or fall over time. Falling remittance amounts per migrant may occur as the diaspora grows relative to the home population, but should not be treated as evidence of so‐called ‘remittance fatigue’. A number of feasible scenarios are traced out, and some opportunities are identified to use statistical tests to adjudicate between self‐interest and altruism as motives for sending remittances.     

Managing the hinterland beyond: Two ideal‐type strategies of economic development for small island territories

Abstract: Rarely does one come across critical analysis which looks at islands as the strategic and candid promoters of a role as political and economic usufructuaries over external resources. This paper is premised on the proposition that a small territory is especially obliged to use extra‐territorial resources as its hinterland for economic success. Such resources extend over a whole range of goods and services and include access to investment, welfare, security, stable currency, international relations, specialised labour power, transfers, markets and higher education. The MIRAB syndrome is one way of articulating this condition. This paper proposes a second cluster of features that are, or can be, deployed by small territories in a manner somewhat different from MIRAB; this second cluster has a more proactive policy orientation and a disposition towards carving out procedural and jurisdictional powers. It is thus proposed to consider a small territory's engagement with the external hinterland as a position on a sliding scale, a strategic mix of options located between two distinct development trajectories, of which MIRAB is one and the PROFIT model the other.     

Alienation and obligation: Religion and social change in Samoa

This paper will explore social change in contemporary Samoan society with respect to the traditional expectations of the church and kinship conflicting with the modern needs of an urbanising population. In the Samoan way of life – the fa'aSamoa – religion, matai (chiefly system) and reciprocal ‘gift‐giving’ kinship arrangements among the aiga (extended family) are fundamental and closely related elements. However, pressures from continued integration into the global economy, the importance of remittance income and related migration of well‐educated and highly skilled Samoans overseas are presenting several challenges to the strongly held traditions of kinship and church obligations. Among these challenges, low‐income households are increasingly placing the material well‐being of the immediate household first, thus ‘opting out’ of the culturally defined primary obligation to the church and risk alienation from beneficial familial ties. As a result, settlement patterns are shifting towards leaseholds in urbanising Apia, with consequences, we will speculate, that may have deeper cultural implications. Our research revealed that the church has been slow to accept that, increasingly, Samoans are seeking relief from hardships that spirituality alone cannot address. However, given its influence, strengths and resources, the church is well positioned to take a lead role in facilitating opportunities for ‘bottom‐up’, alternative development in Samoa, as well as providing lessons for church‐led participatory approaches in the Pacific Island Region.     

From followers to market leaders: Asian electronics firms in the global economy

Abstract: This paper aims to explain how a number of leading electronics firms from Asian newly industrialised economies of Hong Kong, Singapore, South Korea and Taiwan are articulated into global production networks and become major players in their respective market niches. Developing a triangular theoretical framework, I seek to explain the complex relationships between the dynamic articulation of these leading Asian electronics firms into different global production networks and their simultaneous upgrading from typical followers to market leaders. As a critique of the dominant developmental state discourse, I argue that the interplay between corporate strategies and home base advantages within the context of changing global production networks can offer a better explanation of the differentiated competitive outcomes of these Asian firms. This paper draws upon original data collected through personal interviews with top executives from leading electronics firms in the four Asian newly industrialised economies. I conclude the paper with some implications for theory and policy in relation to corporate development in Asian economies.     

Evolutionary Economic Geography for OFCs: Do Political Ties to the Onshore Reduce Capital Inflow Volatility?

This paper analyses the structural change in small‐island economies—sometimes labeled offshore financial centers (OFCs)—that have seen wealth‐generating activities through offshore financial services decrease in value since 2008. At the same time, OFCs have come under increasing scrutiny from supranational organizations such Organization for Economic Co‐operation and Development and European Union for perceived unfair tax practices and money laundering activities. Some OFCs have proactively adjusted to this sea change by broadening the economic base through development of new offshore business activities such as e‐gaming, film industry, and niche manufacturing. Most have increased co‐operation with onshore regulatory bodies to promote service and product legitimacy. Econometric analysis explores the assertion that OFCs that do not have a political link to the onshore may be exposed to greater capital inflows volatility than OFCs that have such a link. Case study analysis using the theoretical lens of evolutionary economic geography illustrates that a small OFC is creating spatialities of economic novelty by adapting economic development strategies deployed during the successful development of the center prior to the recent recession. Our findings reveal the importance of political links to the onshore to reduce capital inflow volatility and the importance of local public–private interaction to legitimize post‐recession development.     

Trading places: Inclusive cities and market vending in the Pacific Islands

Rapid population growth in Pacific island cities far exceeds employment opportunities and is contributing to rising urban inequality and social exclusions. Livelihoods in the informal urban sector, such as market vending, provide much needed income, rural–urban connectivity and food security, but remain largely excluded from policy and planning frameworks. Spatial, economic and social exclusions limit vendors’ economic advancement, their influence over decision‐making, and their access to basic services. Local communities close to informal markets fill some of the gaps left by the policy neglect, but investment and strategic management remains inadequate when vendors do not have secure market places and recognised rights to work. This article reports on a study of three informal markets in Honiara, Solomon Islands. These markets lack legal status but make significant contributions to urban development and economic opportunities. Drawing on surveys and focus groups with vendors and urban decision‐makers we explore the impact of informal markets on urban economies, how social and institutional relationships hinder vendors’ economic advancement, and the opportunities to create more inclusive livelihoods that could contribute to equitable cities.     

House Prices in a Small Island Economy: The Isle of Man

Cointegration techniques are used in order to estimate a long-run equation explaining the movement of average house prices in the Isle of Man. The tendency for the population of a small island economy to fluctuate sharply introduces into the process of price determination a number of features which are not replicated in larger economies.     

Who benefits from international tourism in small Pacific islands? Value capture in the hotel industry in Hawaii

There is a consensus among small Pacific islands that the extent to which they benefit from international tourism largely depends on how much of the value created by tourism remains in the local economy. This study examines how the value created in the hotel industry is distributed among the key stakeholders in a small Pacific island context. We used aggregated income statements of full-service and limited-service hotels from the STR Inc., a hotel industry data company, to calculate the value distribution among the key stakeholders in the hotel industry of a small Pacific island. We found that labour and owners captured most of the value created, whereas hotel management companies and franchisors captured a small share of the value. Our results suggest that tourism workers' ability to take united action and hence to negotiate higher wages will result in higher value capture by local labour and less value leaking out of the local economy. Our results also reveal that foreign ownership in the hotel industry is the single largest cause of economic leakages. The study has several implications for the tourism-based growth policies in small Pacific islands.     

Development prospects in Eastern Indonesia: Learning from Oelua's diverse economy

This paper explores the effects of different representations of informal economies in Third World settings. Both the neoclassical and political economy approaches have represented the informal economy as a transient entity, and the non‐capitalist practices it comprises as being remnant economic forms, or as already capitalist. Mainstream development discourse (that reflects the neoliberal paradigm) continues to ignore the value and potential of non‐capitalist practices and to represent them as inconsequential to development outcomes. Meanwhile contemporary livelihood studies across the social sciences have documented the continuing vibrancy of different and hybrid economic forms in the Asia Pacific. In this paper, I use a diverse‐economies approach to explore the complexities of the village economy of Oelua in Rote, in the so‐called lagging region of Eastern Indonesia. Drawing on anti‐essentialist Marxist theory in economic geography, I describe the multiple, locally specific and coexisting practices that comprise Oelua's diverse economy, which include distributions of surplus labour to promote social and economic well‐being. I argue that recognising informal village economies as an important development resource could begin a process of building diverse development trajectories in Eastern Indonesia, complementing mainstream development proposals to attract foreign direct investment, shore up development assistance and source out‐migration.     

Culture as an Engine of Local Development Processes: System‐Wide Cultural Districts I: Theory

Building on the early works of Alfred Marshall, analyses of local economies have emphasized the spatial function of clusters and industrial districts in terms of external economies of localization and agglomeration. Recent literature has emphasized the importance of culture and the complementarities between culture and local tangible and intangible assets. This paper aims to provide an analytical foundation for these processes with a view to developing tools for policy design, analysis and evaluation. By “system‐wide cultural districts,” we refer to a new approach to local development where cultural production and participation present significant strategic complementarities with other production chains. In this view, culture drives the accumulation of intangible assets such as human, social, and cultural/symbolic capital, thereby fostering economic and social growth and environmental sustainability.     

The brokerage role of small states and territories in global corporate networks

Global economic activity is networked through cross‐national linkages between firm headquarters, branches, and subsidiaries. Brokerage emerges as a key territorial function of this network, with some places acting as gateways or intermediaries for flows of global knowledge, information, or trade. This function is particularly salient for small states and territories leveraging the benefits of borrowed size by offering global professional services, warehousing, logistics, shipping, and finance to wealthy nations or high net individuals. Nonetheless, to date our understanding of how small states and territories facilitate wealth accumulation is limited to broad concepts of their role as “gateways” or “brokers.” Drawing on a typology of brokerage and a network analysis applied to the ties between approximately 700,000 firm headquarter and subsidiary locations of 13 of the world's largest stock exchanges, we explore the brokerage role of small states and territories through case studies of Luxembourg, Singapore, Hong Kong, and Panama. Brokerage is found to play an important role in the economy of all four. We argue that each of these small states and territories is uniquely positioned as a broker in global corporate networks, but that this role differs according to geo‐economic and political positionality.     

Intra‐household constraints on educational attainment in rural households in Papua New Guinea

This paper examines intra‐household and socio‐cultural factors leading to differential outcomes in educational attainment by gender and birth order amongst smallholder oil palm households in Papua New Guinea. Not all children share equitably in the household resources allocated to education: females have lower average education levels than males, and high birth order children have higher education attainment than lower birth order siblings, indicating preferential parental investment in sons and early born children. The findings demonstrate that despite households having regular access to relatively high incomes from oil palm and residing in close proximity to schools, primary school net enrolment rates remain significantly lower than those for East Asia and the Pacific region, and the millennium development goal of universal primary education has not been met. This finding is likely to be the result of a combination of intra‐household factors including gender power imbalances, low parental education levels, the agency of youth in educational decision‐making and the weakening attraction of education as a means of improving income‐earning potential.