"A theory of involuntary unrequited international transfers"
Journal of Political Economy
<simomura@rieb.kobe-u.ac.jp>　　　　　　　　　　　　　  　
The theory of involuntary international transfers (war indemnities) has
been constructed on the assumption that the donor and recipient are
completely indifferent to each other's wellbeing. The assumption is hard to
justify since, usually, the transfers closely follow periods during which
the countries have been dropping bombs on each other. In the present note,
we rework the theory on the more plausible assumption that the wellbeing of
each country is negatively influenced by the wellbeing of the other
country. It is shown that, contrary to the conventional theory, the donor
might benefit at the expense of the recipient, even when local Walrasian
stability is imposed.

"A dynamic Heckscher-Ohlin model: the case of costly factor reallocation"
Japanese Economic Review
<simomura@rieb.kobe-u.ac.jp>
The role of the static Heckscher-Ohlin model in providing
general-equilibrium comparative statics is emphasized. It is then shown (i)
that market-clearing dynamics can be constructed if and only if costly
reallocation of factors is accommodated and (ii) that the introduction of
market-clearing and resource-using dynamics fails to sharpen (and may even
blunt) the comparative statics. Thus a new (non) Correspondence Principle
is derived.

"Relative Wealth, Status-Seeking, and Catching-up"
Journal of Economic Behavior and Organization
<simomura@rieb.kobe-u.ac.jp>
We show that if relative wealth appears in the reduced form utility
function, for example, because of status seeking, then, if the elasticity
of marginal utility of relative wealth is greater than the elasticity of
marginal utility of consumption, the poor will catch up with the rich. We
give sufficient conditions for the final distribution of wealth to be
independent of the initial distribution, and conditions for saddlepoint
stability in a two-class model.

"Revenue-neutral environmental tariff reform, growth and welfare"
Review of International Economics
<tnaito@soc.titech.ac.jp>
This paper analyzes the growth and welfare effects of revenue-neutral tariff
reform in a small-open endogenous growth model with environmental externality.
As is the case in countries which depend primarily on imported energy, the
employment of foreign intermediate good causes negative environmental
externality in production. This paper shows that substituting a tariff on
foreign intermediate good for a tariff on foreign consumption good in a
revenue-neutral way raises the growth rate and the welfare, if the
environmental externality is sufficiently strong and if the elasticity of
substitution between inputs lies within some range.

"Tied Aid and Welfare"
Review of International Economics
<k-abe@econ.osaka-u.ac.jp>
<y-takarada@shobi-u.ac.jp>
In this paper we present a model of tied aid to shed light on the
dispute between Kemp and Kojima (1985) and Schweinberger (1990) and to
complement their analyses. We show that if the households of the
recipient country are not informed of the transfers at their consumption
decision, they have an incentive to trade the purchased goods from their
domestic production income whenever transfer paradoxes occur. We also
demonstrate that when they are aware of the transfers and can trade the
purchased goods from their production income, there are no transfer
paradoxes under the normality condition of commodities.

"Financial Liberalization, Urban Unemployment and Welfare:
Some Implications of the Artificial Low Interest Rate and the High Wage Rate
Policies in LDCs"
Journal of Development Economics
<idaito@intcul.tohoku.ac.jp>
This paper investigates how the low interest rate policy in the commercial
banking sector affects the urban unemployment in a small open Harris-Todaro
model. The rate of urban unemployment unambiguously declines. The volume of
it shrinks if the rural-to-urban employment rate and the urban unemployment
rate are sufficiently high relative to the wage elasticity of agricultural
labor demand. The national income increases if agriculture is dominant in
the domestic production. In such an economy, the "financial liberalization"
advocated by the Mckinnon-Shaw school may aggravate the welfare even if it
eliminates the “financial repression”.

"Tariffs, Quality Choice, and Cost Function: A Foreign Monopoly Case"
Review of International Economics
<ttsutomu@kwansei.ac.jp>
It has been shown that trade restrictions such as tariffs, import
quotas, and voluntary export restrictions, lead to quality upgrading of
imports. In this paper, however, we reconsider this proposition by
focusing on the nature of cost function. Based on a standard vertical
differentiation model, we analyze the effects of tariffs on quality and
quantity of imports. We show that if a fixed cost is an increasing
function of quality, tariffs lead to quality downgrading of imports.
Moreover, we discuss minimum quality requirements (MQR) for such a trade
policy. We show that MQR increases the amount of imports and an
importing country's welfare in the presence of the fixed cost function.
These issues will be addressed in the context of a foreign monopoly.

"The Choice of Optimal Protection under Oligopoly: Import Tariff v.
Production Subsidy"
Japanese Economic Review
<ttsutomu@kwansei.ac.jp>
So far, economists researching the area of optimal protection have
analyzed the ranking of alternative policy tools in the presence of
perfect competition, either when the government in an importing country
achieves a non economic target, or when there is a market distortion.
Assuming international oligopolistic competition, in this paper we
reconsider the choice of optimal policy instruments, i.e., an import
tariff and a production subsidy. We show that the choice of optimal
policy instruments depends on the relative number of home firms and
foreign ones and on the magnitude of international cost differences.

"Quotas, Quality Choice, and Cost Function: A Foreign Monopoly Case"
The International Trade Journal
<ttsutomu@kwansei.ac.jp>
It is well known in international economics that quotas lead to quality
upgrading of imports. In this article however, we reconsider this
proposition by focusing on the nature of cost function. If a fixed cost
is an increasing function of quality, quotas can lead to quality
downgrading of imports. This issue will be addressed in the context of a
foreign monopoly.

"Interconnectivity of Communications Networks and International Trade"
Canadian Journal of Economics
<kikuchi@econ.kobe-u.ac.jp>
This study develops a multi-country model of trade that captures the role of
country-specific communications network interconnectivity, which enhances
trade in intermediate business services.
The number of countries connected to internationally interconnected networks
is found to determine the structure of comparative advantage. That is,
countries with interconnected networks have a comparative advantage in the
good that requires business services provided via networks. In connected
countries, producers of that good benefit from the efficient transmission of
business services.
This research also demonstrates that countries whose country-specific
networks are not connected to the interconnected networks may become worse
off as the result of trade.

"Trade Liberalization and Labor Unions"
Open Economies Review
<kikuchi@econ.kobe-u.ac.jp>
The present note builds a two-country model of Cournot oligopoly with
country-specific labor unions.
The impact of trade liberalization on wages and its consequent impact on
union behavior and trade patterns are examined.  We show that the union with
relatively fewer number of firms will face the stronger pressure for wage
moderation when trade is liberalized. We use this result to construct a
simple example in which a country with higher autarky price becomes a net
exporter of that good.
We also discuss that our results are critically dependent on the mode of
competition between firms.

"Communications Networks and Virtual Economic Integration: The Case of Three
Countries"
International Advances in Economic Research
<kikuchi@econ.kobe-u.ac.jp>
This paper proposes a three-country model of trade that captures the role of
communications networks which enhance trade in business services. The
interconnectivity of country-specific networks is found to determine the
structure of comparative advantage. That is, two countries with
interconnected networks have a comparative advantage in the good that
requires business services provided via networks.
In connected countries, producers of that good benefit from the growing
connectivity  of business services providers.  It is also shown that the
third country which is unconnected to the interconnected networks may be
worse off from trade.

June 2002

"Recent challenges to the classical gains-from-trade proposition "
German Economic Review
<simomura@rieb.kobe-u.ac.jp>
The classical gains-from-trade conjecture was finally given a thorough
Arrow-Debreu proof in 1972. Since 1972, the proposition has been
repeatedly challenged. Some of the challenges rest on grounds which in no
respect violate Arrow-Debreu-assumptions. The remaining challenges rest on
the assertion that some of the Arrow-Debreu assumptions are unnatural and
unnecessarily restrictive or on the imposition of artificial restrictions
on the set of permissible compensatory transfers. We conclude that none of
the challenges can be susteined.

Jacek B. Krawczyk (Victoria University of Wellington) and Koji Shimomura (Kobe University)

"Why ｃountries with the ｓame technology and preferences can have different
growth rates"
Journal of Economic Dynamics & Control
<simomura@rieb.kobe-u.ac.jp>
A standard AK-model of endogenous growth has been extended to
allow for an intertemporal conflict between capitalists and workers. For
the dynamic game thus obtained, an equilibrium solution in feedback Nash
(Markovian) strategies has been computed. However, many equilibria in
trigger strategies can dominate the former. There are dominating strategies
that depend on the country-specific bargaining power of the workers versus
capitalists; they are both Pareto-optimal and subgame-perfect. This
provides an explanation why countries, which are completely identical in
preferences, technology and factor endowments, can experience different
long-term growth rates. 

Ngo Van Long (McGill University) and Koji Shimomura (Kobe University)

"A new proof of the maximum principle"
Economic Theory
<simomura@rieb.kobe-u.ac.jp>
We offer a new proof of the maximum principle, by using the
envelope thorem that is frequently used in the standard microecoonomic
theory. 

Jun-ichi Itaya (Hokkaido University) and Kazuo Mino (Kobe University)

"Inflation. Transactions Costs and Indeterminacy
 in Monetary Economies with Endogenous Growth"
Economica
<mino@econ.kobe-u.ac.jp>
This paper extends the one-sector real model of Benhabib and Farmer
(1994) to a monetary model in which money reduces transactions costs
or shopping time. We show that although the presence of money does not
help to reduce the minimum degree of labor externalities necessary for 
generating indeterminacy, but it tends to narrow the range of parameters
for indeterminacy. We also find that when labor externalities are large,
there may be two steady states, one of which is indeterminate and the
other of which is determinate, and that the Tobin effect in the growth
rate sense (i.e. a higher rate of inflation increases the growth rate
of income) emerges in either steady state depending on the properties
of a transactions cost technology.

Takumi Naito (Tokyo Institute of Technology)

"Revenue-neutral tariff reform and growth in a small open economy"
Journal of Development Economics
<tnaito@soc.titech.ac.jp>
Formulating a two-final-good, two-input, small open endogenous growth model,
we analyze the growth effect of revenue-neutral tariff reform. We find that
the growth effect of tariff reform depends on the pattern of trade and the
elasticities of substitution between inputs and between consumption of final
goods. When the economy specializes in the capital good, the revenue-neutral
substitution of a tariff on the imported final good for a tariff on the
foreign intermediate good always raises the growth rate. However, when the
economy specializes in the consumption good, the revenue-neutral tariff reform
may raise or lower the growth rate.

January 2002

Ichiro Gombi (Ritsumeikan University)

"Multiple Market Intervention for Target Zones"
Japanese Economic Review
<gombi@ec.ritsumei.ac.jp>
This paper examines the way authorities intervene in goods and money markets
in order to keep exchange rates within targeted zones, in an economy where
both the exchange rate and the prices of goods are interdependent
forward-looking variables. We show: (1) that in order to support target
zones in both goods and money markets, there needs to be coordinated,
simultaneous intervention in the two markets; (2) that intervention takes
place almost certainly before the exchange rate or the price of goods
reaches its upper or lower bounds; and (3) that zones for the exchange rate
and for the price of goods cannot be separately designed as independent
policy goals.

"Congestible Communications Networks and International Trade"
Canadian Journal of Economics
<kikuchi@econ.kobe-u.ac.jp>
The present paper builds a two-country model of monopolistic competition
with communications networks.  A communications network is characterized by
(1) the existence of large fixed costs of network provision, and (2) the
presence of congestion.  It is demonstrated that both the size of a country
and the relative magnitude of the congestion effect determine its
comparative advantage: if the congestion effect (resp., the cost-sharing
effect) prevails universally, a comparative advantage in the goods that
require communications is held by the larger (resp., smaller) of the two
countries.