December 2004
Yasunobu Tomoda and Hiroshi Kurata (Hokkaido University)
"Foreign
Equity Caps for International Joint Ventures"
Economics
Bulletin
<kura@pop.econ.hokudai.ac.jp>
We analyze foreign equity caps for international joint ventures. We
develop
a partial equilibrium model in which foreign equity caps are determined
endogenously
and find an interesting property, named a welfare indifference
property; i.e.,
maximization of domestic welfare and that of world welfare are
indifferent for
the host government. This property also implies that the government is
indifferent to the distribution of a JV's profit.
Yin-Wong Cheung (University of California, Santa Cruz), Menzie Chinn
(University of Wisconsin, Madison) and Eiji Fujii (University of Tsukuba)
"The Chinese Economies in Global Context: The Integration Process and Its
Determinants"
Journal of the Japanese and International Economies
<efujii@sk.tsukuba.ac.jp>
The linkages between the People’s Republic of China and the other Chinese
economies of Hong Kong and Taiwan are assessed, and compared against those
with Japan and the US. We first characterize the time series behavior of
three criteria of integration, namely real interest parity, uncovered
interest parity, and relative purchasing power parity. There is evidence
that these parity conditions tend to hold over longer periods between the
People’s Republic of China and all other economies, although they do not
hold instantaneously. Overall, the magnitude of deviations from the parity
conditions is shrinking over time. Amongst all, however, Hong Kong exhibits
indications of a more advanced level of integration with the mainland. We
also find that evidence is surprisingly positive for integration with the
US. We then turn to examining the determinants of the degree of integration.
Regression results suggest that the degree of financial and real integration
depend upon the extent of capital controls, foreign direct investment
linkages as well as exchange rate volatility.
Tomohiro Kuroda (Hitotsubashi University)
"Local content protection reconsidered: the case of domestic monopsonist,"
Economics Bulletin
<ce00720@srv.cc.hit-u.ac.jp>
In this paper we examine how local content protection (LCP) affects the use of
the domestic intermediates, the use of total intermediates and the domestic welfare
when domestic intermediate-goods market is under monopsony. In the domestic
intermediate-goods market under monopsony, the marginal expenditure cost (MEC)
of using domestic intermediates has a discontinuous segment because the average
expenditure cost (AEC) is a kinked curve. It is shown that there exists a case where
because of the discontinuity of the marginal expenditure cost, LCP has no effect on
the use of domestic intermediates and has a negative impact on the domestic final-goods
producer. This paper provides a summary of the general effects of LCP on the domestic
intermediate-goods market under monopsony in terms of resource allocations and
the domestic welfare. Moreover, the effects of LCP under monopsony are compared with
the case under perfect competition and under free trade.
Toru Kikuchi (Kobe University) and Dao-Zhi Zeng (Kagawa University)
"On Chamberlinian-Ricardian Trade Patterns with Many Industries"
Economics Bulletin
<kikuchi@econ.kobe-u.ac.jp><zeng@ec.kagawa-u.ac.jp>
This note explores the determinants of trade patterns by extending a
Chamberlinian-Ricardian monopolistic competition trade model to have a
larger number of industries as did Dornbush, Fischer and Samuelson (1977).
It will be shown that the degree of cross-country technical differences
among industries plays an important role as a determinant of trade within
each industry.
November 2004
Toru Kikuchi (Kobe University)
"On Gains from Interconnection of Networks"
International Trade Journal
<kikuchi@econ.kobe-u.ac.jp>
Using a two-country, multi-region model of monopolistic competition with
country-specific networks, this note establishes a link between gains from
trade in differentiated services and gains from interconnection of networks.
Toru Kikuchi (Kobe University)
"Interconnected Communications Networks and Home Market Effects"
Canadian Journal of Economics
<kikuchi@econ.kobe-u.ac.jp>
This study develops a model of trade that highlights the effects of the
interconnection of country-specific communications networks as a driving
force behind trade in high-tech products with positive transport costs. By
constructing a two-country model of monopolistic competition with two
production factors, it is shown that the locational decisions of firms may
magnify the influence of interconnected networks. In a reversal of the
standard home market effects, the abundance of unskilled labor in the
developing countries can attract high-tech firms from the developed
countries.
Laixun Zhao (Kobe University), Zhihao Yu (Carlton University)
and Yoshiko Onuma (Tsukuba University)
"A Theory of Mutual Migration of Polluting Firms"
Canadian Journal of Economics
<zhao@rieb.kobe-u.ac.jp>
Suppose that governments care about their tax revenue and local
firms have some say in environmental regulations. Then, the level of
employment and environmental compliance may be negotiated. We find that
firms located in different countries can improve their threat-point payoffs
by mutual migration. This in turn affects the negotiated output/employment
and environmental regulations, which causes profits to increase if the firm’s
threat-point payoff is higher than that of the local government. The model
predicts that pollution-intensive firms are more likely to move out.
Increases in the government’s valuation of the environment, or in the
degree of globalization also cause mutual migration of dirty firms. The
effect of a government caring about consumer surplus leads to a lower
pollution tax, reducing firms’ incentives to move out.
Kenzo Abe (Osaka University) and Laixun Zhao (Kobe University)
"Endogenous International Joint Ventures and the Environment"
Journal of International Economics
<zhao@rieb.kobe-u.ac.jp>
This paper examines the welfare effects of emission taxes under a choice
between an international joint venture (JV) and a full-ownership FDI
(Foreign Direct Investment) by parent firms from a developed country (the
North) and a developing country (the South), as well as their location and
share decisions. If the South has a poor abatement technology, its best
policy is to impose a relatively high emission tax to attract a full-ownership
FDI. If it has a good abatement technology, the best policy is to impose
a relatively low emission tax to attract the JV. Furthermore,
deregulation of foreign ownership of the JV improves the quality of the
environment.
October 2004
Kazuo Mino (Osaka University), Koji Shimomura (Kobe University),
and Ping Wang (Vanderbilt University)
"Occupational Choice and Dynamic Indeterminacy"
Review of Economic Dynamics
<simomura@rieb.kobe-u.ac.jp>
This paper constructs a two-sector model of two-period lived overlapping
generations with endogenous occupational choice in which
ability-heterogeneous agents choose whether to become educated when young
and skilled when old. We show that endogenous occupational choice in this
two-sector framework can result in dynamic indeterminacy without
complicated preferences/technologies and without requiring the
consumption-good production to be more capital-intensive.
September 2004
Kiyoshi Matsubara
(Nagoya City University)
“Import
Penetration and Domestic Process Innovation”
Review of
International Economics
<matubara@econ.nagoya-cu.ac.jp>
This
paper develops a model of R&D competition between domestic and
foreign firms
that explicitly incorporates the effect of the market structure. We
focus on
how differences
in costs modify the effects of increases in the number of
foreign firms on R&D investments
of domestic firms. We show that an increase in
the number of
foreign firms may have
a positive effect on a domestic firm's R&D
investment. We also show that two trade
policies,
tariffs or quotas, could have different effects on R&D
investments of domestic firms.
A welfare
analysis shows that greater cost advantages increase social welfare.
Toru Kikuchi (Kobe University) and Koji Shimomura (Kobe University)
"Monopolistic Competition with Efficiency Gaps and a Heckscher-Ohlin Trade
Pattern"
Japanese Economic Review
<kikuchi@econ.kobe-u.ac.jp>
<simomura@mail.rieb.kobe-u.ac.jp>
We develop a two-factor, three-sector model of international trade in which
the monopolistically competitive firms are characterized by different fixed
production costs.
We show that, depending on the pattern of the international distribution of
factor endowments, the trade pattern is determined not only by relative
factor endowments as suggested by Heckscher and Ohlin, but also by absolute
factor endowments via a mechanism of competitive selection in the
monopolistically competitive sector.
August 2004
Junko Doi (Kyoto Sangyo University) and Kazuo Mino (Osaka University)
"Technological Spillovers and Patterns of Growth with Sector-Specific R&D"
Journal of Macroeconomics
<mino@econ.osaka-u.ac.jp>
This paper studies a two-sector model of endogenous
technical change in which expansion of each production
sector is associated with sector-specific R&D investment.
We show that the pattern of growth is sensitive to
the specification of intersectoral technological spillovers
as well as to the preference structure. If technological
spillovers and preferences of consumers are represented by
CES functional forms, the balanced-growth equilibrium may not
exhibit a well-behaved saddlepoint property: it is possible
that the balanced-growth path is locally indeterminate or
unstable. In addition, a slight modification of technological
spillover effects easily yields multiple balanced-growth paths.
In contrast, Cobb-Douglas specifications present a unique and
determinate balanced-growth equilibrium.
Yasuhiro Takarada
(Nanzan University)
"On the Welfare Effects of
Technology Transfer"
Pacific Economic
Review
<ytakara@ps.nanzan-u.ac.jp>
This paper examines the
welfare effects
of aid tied to technology transfer
in
a two-country general equilibrium model. In the recipient country,
some
factors of production employed in a particular industry are
difficult
to use in other industries because their properties are
specific
to the industry. Technology transfer facilitates ‘factor
movement’
and improves the efficiency of factor markets in the
recipient.
We identify and interpret the conditions under which
technology
transfer benefits the recipient and harms the donor. We also
show
that technology transfer can enrich (or harm) both the donor and
the
recipient under certain conditions.
July 2004
Toru Kikuchi (Kobe University)
"A Note on Chamberlinian-Ricardian Trade Patterns"
Economics Bulletin
<kikuchi@econ.kobe-u.ac.jp>
Using a two-country model of monopolistic competition with cross-country
technical heterogeneity, this note explores the determinants of comparative
advantage. It is shown that trade patterns are determined by a technology
index, and that autarky relative prices do not serve as reliable predictors
of trade patterns.
Toru Kikuchi (Kobe University)
"Virtual Integration and Endogenous Growth in the World Economy"
International Advances in Economic Research
<kikuchi@econ.kobe-u.ac.jp>
This study develops a three-country model of endogenous growth that captures
the role of the interconnection of country-specific communications networks
(i.e., virtual integration), which affects the productivity of R&D activity
through an increase in stock of knowledge capital. The number of countries
connected to internationally interconnected networks is found to determine
the structure of dynamic comparative advantages. That is, countries with
interconnected networks have a dynamic comparative advantage in differentiated
products that require communication and R&D activities. In the connected countries,
researchers gain from efficient R&D activity through the utilization of the greater
stock of knowledge capital.
June 2004
Eiji
Fujii (University
of Tsukuba)
"Intra and Inter-Regional
Causal
Linkages of Emerging Stock Markets:
Evidence from Asia
and Latin America
in and out of Crises"
Journal of
International Financial Markets, Institutions & Money
<efujii@sk.tsukuba.ac.jp>
This study examines the causal
linkages
among several emerging stock markets
in
Asia
and Latin America
since 1990. These markets experienced both rapid growth
and
major upheaval during the sample period, and thus, provide potentially
rich
information
on
the nature of cross-market interactions. Using daily observations of
stock
indices
and
the GARCH family of econometric models, we conduct the residual
cross-correlation
function
tests to investigate cross-market causality both in the first and
second
moments
of
the stock returns. The empirical results reveal significant causal
linkages
both within
each
region and across the two regions. Further, our rolling test results
indicate
that the
significance
of the causality varies considerably over time. Importantly, we find
that
the
causal linkages tend to strengthen particularly at the time of major
financial
crises.
The empirical results also
point to some
imperative issues including inter-regional asymmetry
in
the causality and persistence of shocks on market linkages.
May 2004
Fumiko Takeda
(University of Tokyo)
and Koichi Takeda (Hosei University)
"Refinance and Coordination among Multiple Creditors and a Debtor
Firm"
Global Business & Economics Review -Anthology 2004
< takeda＠geosys.t.u-tokyo.ac.jp>
This paper investigates the conditions under which a large creditor
provides
a debtor firm with refinance and examines how it affects the decisions
of
the debtor firm and other creditors. Our analyses are based on a
coordination game among multiple creditors and a debtor firm under
incomplete information. We find that refinancing can increase the
payoff of
the large creditor only when the debtor firm faces a substantial, but
not
hopeless, risk of default. Whether the refinance succeeds in preventing
the
default caused by the coordination failure among creditors and the
debtor
firm, or incurs the moral hazard of the debtor firm, depends on how
poor the
fundamentals of the debtor firm are. Another finding is that the size
of the
refinance tends to be larger in cases where the prior lending by a large
creditor was greater, resulting in more serious moral hazards.
April 2004
Toru
Kikuchi
(Kobe University)
"Agricultural Productivity, Business Services, and Comparative
Advantage"
Open Economies Review
<kikuchi@econ.kobe-u.ac.jp>
This study develops a two-good (agriculture and technology) model of
trade
that captures the role of agricultural productivity, which deepens the
division of labor in the technology sector. The level of the
agricultural
productivity is found to determine the structure of comparative
advantage:
the country that has an absolute advantage in the agricultural sector
also
has a comparative advantage in the technology sector.
Toru Kikuchi (Kobe University)
"Communications Networks and Regional Economic Development"
Journal of the Korean Economy
<kikuchi@econ.kobe-u.ac.jp>
Recently Korea showed the signs of a strong economy with sophisticated
communications networks (e.g., broadband network services, wireless
telecommunications networks): a growing connectivity across regions
through
networks becomes a crucial factor in determining the performance of the
Korean economy. This study develops a multi-region model that captures
the role
of
communications networks in enhancing interregional trade in
intermediate
business services. A link between the adoption of communications
networks
and improved regional performance is explored. The paper also examines
the relationship between interregional trade in business services and
international trade in goods.
Toru Kikuchi (Kobe University)
"Technological Catch-up and Reversed Home Market Effects"
Keio Economic Studies
<kikuchi@econ.kobe-u.ac.jp>
This study develops a model of trade that highlights the effects of
technological catch-up due to falling communication costs as a driving
force behind trade in goods with positive transportation costs.
It is shown that the impact of catch-up may be magnified through firms'
location decisions: due to the reversed home market effects, firms in
the
developed country begin to move to the developing country.
Toru Kikuchi (Kobe University)
"On the Enlargement of Interconnected Communications Networks in the
World
Economy"
Quarterly Review of Economics and Finance
<kikuchi@econ.kobe-u.ac.jp>
This note 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 effect of an enlargement of the network, which implies an increase
in
the number of countries connected through networks, is examined.
It is shown that, from the viewpoint of the connected countries, an
enlargement of the interconnected networks has two conflictiing
effects:
gains due to increased specialization and losses from a deterioration
in
the terms of trade.
Toru Kikuchi (Kobe University)
"On the Interconnection of Networks and Gains from Trade in Business
Services"
Journal of Economic Research
<kikuchi@econ.kobe-u.ac.jp>
Using a two-country model of monopolistic competition with
country-specific
communications networks, this note establishes a link between gains
from
trade in intermediate business services and gains from the
interconnection
of networks.
March
2004
Naoto Jinji (Hitotsubashi University) and Tsuyoshi Toshimitsu (Kwansei
Gakuin
University)
"Minimum Quality Standards under Asymmetric Duopoly with Endogenous
Quality Ordering: A Note"
Journal of Regulatory Economics
<njinji@econ.hit-u.ac.jp>
In this note, we revisit minimum quality standards (MQS) under a
vertically differentiated duopoly. We generalize the model in Ronnen
(1991) and Valletti (2000) by introducing asymmetry into the fixed cost
of quality improvement and by explicitly taking into account the
endogeneity of quality ordering. In the generalized model, we show that
the results derived by Ronnen (1991) and Valletti (2000) are largely
robust.
Jun-ichi
Itaya
(Hokkaido University) and Kazuo Mino (Kobe University)
"Interest-Rate Rule and Multiple Equilibria with Endogenous Growth"
Economics Bulletin
<mino@econ.kobe-u.ac.jp>
This paper examines the role of interest-rate feedback rule in
a monetary endogenous growth model in which money is introduced
via a cash-in-advance constraint and long-run growth is sustained
by external increasing returns. It is shown that dynamic properties
as well as the balanced-growth characterization are highly sensitive
not only to the degree of increasing returns but also to the interest
-rate feedback rule adopted by the monetary authority. In particular,
the conditions for indeterminacy of equilibrium depends heavily upon
whether the interest-rate rule is active or passive.
Kauzo Mino (Kobe University)
"Weitzman's Rule with Market Distortions"
Japan and the World Economy
<mino@econ.kobe-u.ac.jp>
Weitzman (1976) provides a foundation for net national product
of a competitive economy as the annuity equivalent of the present
discounted value of maximized consumption. This paper considers
how Weitzman's rule should be modified if the competitive equilibrium
is affected by the presence of market distortions. The paper first
examines the model with external effects of capital in which there
are spillovers of knowledge. The paper also studies the model with
policy interventions where the policy maker seeks the second best
allocation. The central concern of the paper is to elucidate the
factors that generate a divergence between the net national product
and the welfare equivalent of maximized consumption. In discussing
each model, the paper presents a typical example that has been
widely discussed in the literature.
Takumi Naito (Tokyo Institute of Technology)
"Pattern of trade and indeterminacy"
Journal of Macroeconomics
<tnaito@soc.titech.ac.jp>
This paper presents a three-sector small open endogenous growth model
with
physical and human capital and constant returns to scale. The model
shows that
the transitional path may be either saddle-path stable or indeterminate,
depending on the pattern of specialization. This occurs for two reasons.
First, in the presence of capital and labor income taxes, factor
intensity
rankings between the operating corporate sector and the education
sector in
value and physical senses can differ, which may cause too many
stabilizing
forces. Second, the change in the pattern of specialization discretely
changes
factor intensities in the operating corporate sector.
Kenji
Fujiwara and Koji Shimomura
“A
Factor Endowment Theory of International Trade under Imperfect
Competition
and Increasing Returns”
Canadian
Journal of Economics
<simomura@rieb.kobe-u.ac.jp>
Constructing
a two-good (competitive and imperfectly-competitive goods),
two-primary factor (capital
and labor) and
two-country model of international
trade where the
imperfectly-competitive sector is subject to
increasing returns
to scale, we
establish an oligopolistic
version of the Heckscher-Ohlin theorem.