October 2000
Laixun Zhao (Hokkaido University)
"Quantitative Trade Restrictions in Unionized Economies"
Review of International Economics
<zhao@econ.hokudai.ac.jp>
This paper models the interactions of a labor union and a monopoly
firm
under an import quota in a small open economy. The distorted equilibrium
is
depicted in a diagram, in which wages and employment in both sectors,
and
the monopoly rent can be identified. The imposition of an import
quota in
the unionized sector reduces monopoly rent, union employment and
wages in
both sectors, compared with the case of autarky. In addition, we
present
several surprising comparative statics results. For instance, an
increase in
the world price causes the protected (i.e., `wrong') sector to shrink,
wages
to decrease, and national income to rise if the initial world price
is low.
Laixun Zhao (Hokkaido University)
"Unionization, Vertical Markets and Outsourcing of Multinationals"
Journal of International Economics
<zhao@econ.hokudai.ac.jp>
This paper offers an explanation for multinationals that are both
horizontally and vertically related. Specifically, when labor is
unionized,
the conventional incentives for merger may disappear in industries
of
successive (or bilateral) monopoly, due to `double marginalization',
which
limits the amount of surplus that can be bargained between labor
and the
firms. We show that vertical integration raises both union employment
and
the negotiated wage, but may reduce total industry profits. As such,
the
integrated firm has incentives to outsource - to go multinational,
regardless of whether the foreign country is unionized or not. We
demonstrate that the negotiated wage decreases and firm profits
increase
with outsourcing. Thus, unionization in vertically related markets
can make
firms become multinational conglomerates that are both vertically
and
horizontally related.
September 2000
Eiji Fujii (Otaru University of Commerce) and
Menzie Chinn (University of California, Santa Cruz)
"Fin de Siecle Real Interest Parity"
Journal of International Financial Markets, Institutions &
Money
<efujii@res.otaru-uc.ac.jp>
We evaluate the recent evidence for real interest parity, focusing
on
long-term yields. Examining the data on financial instruments of
various
maturities across the G7 countries, we find substantial differences
in the
degree of real interest equalization measured at different horizons.
In
general, real interest parity holds better at long horizons than
at short.
This empirical result is robust to alternative ways of modeling
expected
inflation rates. Considering the relevance of long-term yields for
the
investment decisions of firms, our findings imply that the degree
of capital
mobility among the G-7 economies may be greater than previously
thought.
August 2000
Laixun Zhao (Hokkaido University)
"Decentralization and Transfer Pricing under Oligopoly"
Southern Economic Journal
<zhao@econ.hokudai.ac.jp>
This paper presents a simple model of a partially decentralized
multinational firm (MNF) in competition with a rival firm. It is
shown that
transfer pricing can be used as a rent-shifting device by the MNF
to compete
with the rival. This arises because the MNF headquarters uses the
transfer
price to manage different subsidiaries. The specific value of the
transfer
price chosen by the MNF depends on whether the rival firm produces
the
intermediate good or the final good or both of them, and whether
the rival
is integrated or not. In particular, both decentralization and competition
with a fully integrated rival result in a lower transfer price.
Kazuo Mino (Kobe University) and Akihisa Shibata (Kyoto University)
,
"Growth and Welfare Effects of Monetary Expansion in an Overlapping
Generations Economy"
Japanese Economic Review
<mino@rose.rokkodai.kobe-u.ac.jp>
This paper studies the relation between money supply and long-run
economic growth
in the context of an endogenous growth model with overlapping generations.
We present
detailed analyses of growth and welfare effects of monetary expansion
under alternative
money supply rules. It is shown that although monetary expansion
has a growth enhancing
effect in the long run, in general it is not a Pareto improving
policy. We also pay much
attention to the presence of multiple equilibria in endogenous money
supply regimes.
Kazuo Mino (Kobe University)
" Sector-Specific Externalities and Endogenous Growth under Social
Constant Returns"
Journal of Economic Theory
<mino@rose.rokkodai.kobe-u.ac.jp>
By examining two-sector models of endogenous growth with physical
and human capital,
this paper demonstrates that indeterminacy of equilibrium may emerge
even in the absence
of social increasing returns. The first model we examine assumes
that both final good and
new human capital production sectors employ physical as well as
human capital under social
constant returns but private decreasing returns due to the presence
of sector-specific externalities.
It is shown that a small divergence between private and social factor
intensity conditions
generates indeterminacy of equilibrium rather easily even under
constant returns. I addition,
we show that introducing home production into the base model may
enhance the possibility of
indeterminacy. Some extensions and intuitive interpretation of the
indeterminacy conditions are
also presented.
Kazuo Mino (Kobe University)
"Optimal Taxation in Dynamic Economies with Increasing Returns",
Japan and the World Economy
<mino@rose.rokkodai.kobe-u.ac.jp>
This paper studies optimal taxation in dynamic economies with increasing
returns. We show
that if there exists a stable open-loop Stackelberg equilibrium,
the optimal rate of tax
on capital income in the steady state is negative in order to eliminate
the wedge between
the private and the social rate of return to capital. This result
also holds when the government
expenditure has a positive effect on production activities of the
private agents. In contrast,
if the government takes a feedback strategy and if the government
budget is balanced
in every period, then the optimal capital income taxation rule obtained
under the open-loop strategy
may be violated. It is, however, shown that if the government can
issue debt, the negative capital
income tax rule may be established even under the feedback policy
rule.
Richard Cornes(Keele University), Ngo Van Long(McGill Universty) and
Koji Shimomura(Kobe University)
"Drugs and Pests: Intertemporal Production Externalities"
Japan and the World Economy
<simomura@rieb.kobe-u.ac.jp>
We model the non-cooperative choice of levels of inputs whose current
usage results in the future decline in their effectiveness. We show that
there are multiple equilibria that are Pareto rankable. Compared with the
social optimum, lack of cooperation implies excessive use of input, leading
to excessively rapid rates of decline in effectiveness. The harm is more
pronounced when firms use Markov perfect strategies, as compared with open-loop
strategies.
Murray C. Kemp(University of New South Wales), Ngo Van Long(McGill University)
and Koji Shimomura(Kobe University)
"A Differential Game Model of Tariff War"
Japan and the World Economy
<simomura@rieb.kobe-u.ac.jp>
We present a simple two(-country) by two(-good) differential game
model of international trade in which the governments of the two countries
play a tariff-setting game. We explicitly derive a unilateral optimum tariff
rate and then a Markov-perfect equilibrium pair of strategies (bilateral
optimum tariff strategies) and compare the welfare level of each country
among autarchic, fre-trade, unilateral and bilateral tariff equilibria.
June 2000
-
Toru Kikuchi (Kobe University)
"Country-Specific Communications Networks and International Trade
in a Model of Monopolistic Competition"
Japanese Economic Review
<kikuchi@rose.rokkodai.kobe-u.ac.jp>
This study develops a model of monopolistic competition that captures
the
role of country-specific communications networks in determining
the
comparative advantages of countries. A communications network
is
characterized by (1) the existence of a large fixed cost for its
construction; and (2) a public monopoly that employs average-cost
pricing.
It is demonstrated that the size of a country, measured by the size
of the
country's endowment of factors of production, determines its comparative
advantage. A comparative advantage in the goods that require services
provided by a communications network is held by the larger of two
countries.
April 2000
-
Jun-ichi Itaya (Hokkaido University) and Koji Shimomura (Kobe University)
-
"A dynamic conjectural variations
model in the private provision of public goods:
-
a differential game approach"
Journal of Public
Economics
<simomura@rieb.kobe-u.ac.jp>
The purpose of this paper
is to provide reasonable microfoundation to justify
the concept of a conjectural
variations equilibrium which is often used in the literature
on the private provision
of public goods with the help of the differential game.
By interpreting the steady
state conjectures in a dynamic provision game as
the conjectural variations
in the corresponding static game, we derive explicit forms
of Nash or nonzero conjectural
variations, depending on the choice of the strategy spaces.
Furthermore, we find
that there may be uncountable many conjectural variations and
the possibility of matching
behavior (i.e., positive conjectures), when nonlinear Markov
perfect strategies are
used and when the domain of a state variable is a appropriately restricted.
-
Murray C. Kemp (University of New South Wales) and Koji Shimomura (Kobe
University)
-
"The gains from free trade
when workers are not indifferent to their occupations"
-
Journal of Post Keynesian
Economics
-
<simomura@rieb.kobe-u.ac.jp>
-
In a recent issue of the
Journal of Post Keynesian Economics Paul Tompkinson
-
re-opened an old debate between
L. Thurow on the one hand and E. Katz and
-
M. Syrquin on the other,
re-affirming the possibility that free trade may be
-
potentially harmful if workers
are not indifferent to their occupations. However,
-
Tompkinson's model excludes
all sources of market failure and in fact a special case
-
of the Arrow-Debre model,
which is known to ensure potentially gainful trade.
-
The source of Tompkinson's
error is noted.
March 2000
-
Yin-Wong Cheung (University of California,Santa Cruz) and
-
Eiji Fujii (Otaru University of Commerce)
-
"Which Aggregate Output Measures
Should We Use?"
-
Journal of Macroeconomics
(v.22,
n.2, Spring 2000)
-
<efujii@res.otaru-uc.ac.jp>
-
In this paper, we compare
the temporal behavior of four monthly measures of
-
aggregate output: namely,
GDP, ICI, IP, and XCI. These four measures of
-
output are found to have
a common long-run component but distinct short-run
-
cyclical patterns. The monetary
effects on each of these four output
-
variables are used to illustrate
the implications of the choice of an output
-
measure on empirical research.
It is found that test results can be driven
-
by the choice of the proxy
for aggregate output.