December 2005

Toru Kikuchi (Kobe University) and Koji Shimomura (KObe University)
"Monopolistic competition with cross-country technological differences
and international trade"
Japan and the World Economy
<simomura@rieb.kobe-u.ac.jp>

We develop a two-factor, three-sector model of international trade in
which there are cross-country technological differences in the monopolistically 
competitive sector. Firms in one country have a technology with high
fixed costs and low marginal costs; firms in the other country have a
technology with low fixed but high marginal costs. Under this model,
although not under the monopolistically competitive model with identical
technologies, trade patterns are determined by the interaction between
the distribution of factor endowments (i.e., the Heckscher-Ohlin aspect)
and technological differences in the monopolistically competitive sector
(i.e., the Chamberlinian-Ricardian aspect). Furthermore, we show that
autarky commodity prices are not very useful for predicting trade
patterns, which is counterintuitive and again contrary to findings under
the monopolistically competitive model with identical technologies.

November 2005

Ryuhei Wakasugi (Keio University)
"The Effects of Chinese Regional Conditions on the Location Choice of Japanese Affiliates"
Japanese Economic Review
<wakasugi@econ.keio.ac.jp>
This paper examines how  heterogeneous factors such as the abundance of better educated human resources,
wage costs, increasing numbers of special economic zones, industrial agglomeration and the enrichment of
social infrastructure affect the location choice of Japanese affiliates by correlating Japanese data to data
from Chinese provinces and Special Cities. The results reveal that factors related to human resources are
more important than the 'hard' factors in attracting foreign firms to invest China.

Naoto Jinji (Okayama University)
"International Trade and Terrestrial Open-access Renewable Resources in a Small Open Economy"
Canadian Journal of Economics
<jinji@e.okayama-u.ac.jp>
In this paper, I investigate the effects of trade liberalization and policies on deforestation by extending
a small open economy model with open-access renewable resources developed by Brander and Taylor (1997a).
I endogenize the carrying capacity of the resource.  I find that unlike Brander and Taylor, trade liberalization
may increase the forest stock in the resource abundant country and may decrease the forest stock in the resource
scarce country.  Moreover, the policies primarily aimed at protecting forests, such as import restrictions by
importing countries and forest certification for well-managed forests, may have perverse effects on the forest stock.

Kazuo Nishimura (Kyoto University) and Koji Shimomura (Kobe University)
"Indeterminacy in a dynamic two-country model"

Economic Theory

<simomura@rieb.kobe-u.ac.jp>

The purpose of this paper is to show that indeterminacy can arise in a simple competitive two-country dynamic model
of international trade, free of externalities, imperfect competition, and government intervention. This seemingly
surprising result is based on an assumption that there is no international credit market. As well be shown later,
the assumption implies that dynamic equilibrium paths of our two-country, therefore heterogeneous consumer,
model are not generally Pareto-optimal.

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

“Voluntary Contributions to a Public Good: Non-neutrality Results”

Pacific Economic Review

<simomura@rieb.kobe-u.ac.jp>

We show that the well-known neutrality theorem (that a small redistribution of wealth does not affect the aggregate
private provision of a public good) no longer holds if agents take into account the effect of their individual supply of
the public good on the relative price of private goods.

Kazuo Nishimura (Kyoto University), Koji Shimomura (Kobe University) and Ping Wang (Washington University)

“Duality with Sector-Specific Externalities Under Social Constant Returns”

Japanese Economic Review

<simomura@rieb.kobe-u.ac.jp>

We develop dual approaches to quantity and price relationship of the production in a general multisectoral model
with sector-specific externalities. The production of each good exhibits socially constant returns to scale but privately
decreasing returns. We find that the Stolper-Samuelson theorem holds for factor intensity ranking from the social
perspective and that the Rybczynski theorem holds for factor intensity ranking from the private perspective. The
price-output dual fails to hold in general. Moreover, we re-establish the Heckscher-Ohlin theorem in the two-sector
case, as well as the factor endowment-factor price and price-output comparative statics in the high-dimension case
under proper conditions.

Kazuo Nishimura (Kyoto University), Koji Shimomura (Kobe University) and Ping Wang (Washington University)

“Production Externalities and Local Dynamics in Discrete-Time Multi-Sector Growth Models with General Production Technologies”

International Journal of Economic Theory

<simomura@rieb.kobe-u.ac.jp>

The present paper examines the dynamic properties of discrete-time, multi-sector growth models in the presence of
sector-specific externalities. It extends the literature by allowing for multiple capital good sectors with general socially
constant-returns production technologies. We establish conditions for the steady-state equilibrium to be locally determinate
or locally indeterminate, depending crucially on the rations of the social to private marginal products and the number of
capital good sectors. We show that when the rations of the social to private marginal products are uniform across all sectors,
the steady state is always locally determinate in a two-sector model, although local indeterminacy might still arise when
the economy features more than two sectors.

Yunfang Hu (Kobe University), Murray C. Kemp (Macquarie University) and Koji Shimomura (Kobe University)

“Endogenous Growth: Fragile Foundations?”

Review of Development Economics

<simomura@rieb.kobe-u.ac.jp>

The Frankel, Romer and Lucas theories if endogenous growth rest on the assumptions of knowledge-based externalities
and price-taking representative agents. It is argued that, in an context of long-run growth, these assumptions are mutually
incompatible, that representative agents will cooperate to internalize the externalities and will cease to be price takers,
and that therefore the relevance of theories base on those assumptions must be questioned.

Yunfang Hu (Kobe University), Murray C. Kemp (Macquarie University) and Koji Shimomura (Kobe University)

“A Factor Endowment Theory of Endogenous Growth and International Trade”

Review of Development Economics

<simomura@rieb.kobe-u.ac.jp>

This paper presents a dynamic general equilibrium model of multi-country, two-good and two-factor, in which both long-run
growth and international trade patterns are examined. In each country, government expenditure on a public intermediate good
plays a crucial rile in the realization of persistent growth. It is shown that the long-run pattern of international trade is determined
in a Heckscher-Ohlin manner.

Murray C. Kemp (Macquarie University) and Koji Shimomura (Kobe University)

“Trade Between Countries with Radically Different Preferences”

Economics Bulletin

<simomura@rieb.kobe-u.ac.jp>

We examine the role of radical international differences in preferences in determining patterns of international trade,
given that the trading countries share a common technology and identical factor endowment ratios. It is characteristic
of our model that the equilibrium autarkic commodity price ratios are unique and negative and that there is a unique
positive equilibrium free- trade price ratio, implying that the positive equilibrium free-trade price ratio is not bounded
by the equilibrium autarkic price ratios. This finding contrasts sharply with the familiar Torrens-Ricardo and Heckscher-
Ohlin propositions.

Toru Kikuchi (Kobe University), Koji Shimomura (Kobe University) and Dao-Zhi Zeng (Kagawa University)

“On the Emergence of Intra-Industry Trade”

Journal of Economics

<simomura@rieb.kobe-u.ac.jp>

This study explores the determinants of intra-industry trade 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 and important role as a determinant
of trade within each industry.

Noritsugu Nakanishi (Kobe University)
"Free Entry, Market Size, and the Optimistic Stability"
International Game Theory Review
<nakanishi@econ.kobe-u.ac.jp>
We examine the long-run outcomes under free entry-exit when each firm not only takes account of the effects of her own entry-exit on the market structure but also takes full account of the effects due to other firms' simultaneous entry-exit. Adopting the framework of the theory of social situations (TOSS), we derive a unique set of stable outcomes, which is based only on two fundamental assumptions of the ``firms-as-profit-maximizers'' and the ``free entry-exit,'' but not on any specific mode of play (i.e., a specification of how the players make their decisions, take actions  within the market, and think of the other players' behavior). We compare the stable outcome with the long-run equilibria under the competitive mode, the Cournot-Nash mode, and the monopolistically competitive mode. We find that (i) each of these equilibria can be compatible with the stable outcome only if the market size is small and (ii) none of them can be compatible with the stable outcome if the market size is sufficiently large; Further, (iii), for almost all market size, the monopolistically competitive equilibrium is  compatible with the stable outcome if the elasticity of substitution is sufficiently close to (but, greater than) unity. In a sense, when the market size is sufficiently large, these three modes of play are not consistent with two fundamental assumptions.

October 2005

Tsuyoshi Toshimitsu (Kwansei Gakuin University) and Naoto Jinji (Okayama University)
"QUALITY DIFFERENTIATION, WELFARE, AND THE MODE OF COMPETITION 
IN A VERTICALLY DIFFERENTIATED PRODUCT MARKET: A NOTE"
Japanese Economic Review
<ttstuomu@kwansei.ac.jp>
We analyze the implications of quality differences in a vertically differentiated product market 
for social welfare by employing an endogenous quality choice model. We find that in the cases of 
Bertrand and Cournot duopolies, the degree of quality differentiation at equilibrium in an unregulated 
market is larger or smaller, respectively, than that of the socially second-best optimum. This implies 
that a reduction in quality difference respectively increases or decreases social welfare in the case of 
Bertrand or Cournot duopolies.

September 2005

Nobuhito Suga (Nagoya University) and Makoto Tawada (Nagoya University)

"International Trade with a Public Intermediate Good and the Gains from Trade"

Review of International Economics

<mtawada@soec.nagoya-u.ac.jp>

This paper presents a one-primary factor, two-consumer good and two-country model of
international trade where each country’s government supplies a country-specific public
intermediate good so as to attain efficient production. By introducing the Marshallian
adjustment process, it is demonstrated that the country with larger factor endowment
exports the good whose productivity is more sensitive to the public intermediate good.
Our analysis concerning the normative aspects of free trade shows the following results.
First, at least one country gains from trade. Second, if a country incompletely specializes
in the trading equilibrium, the country necessarily loses from trade.

Jota Ishikawa, Hiroshi Mukunoki and Yoshihiro Mizoguchi
"Economic Integration and Rules of Origin under International Oligopoly"
International Economic Review
<jota@econ.hit-u.ac.jp>
Free trade agreements (FTAs) have rules of origin (ROOs) to prevent tariff
circumvention by firms of non-member countries. This paper points out that
in imperfectly competitive markets, ROOs have another role overlooked in the
existing literature. Instead of focusing on the impacts of ROOs in the
intermediate-good markets, we draw our attention to the final-good markets
to examine the effects of ROOs. We find that under some conditions, ROOs
benefit both firms at the expense of consumers. Under some other conditions,
ROOs benefit the firm producing outside the FTA and hurt the firm producing
inside the FTA.

Keisaku Higashida　(Fukushima University) and Naoto Jinji (Okayama University)

"Strategic Use of Recycled Content Standards under International Duopoly''

Journal of Environmental Economics and Management

< e038@ipc.fukushima-u.ac.jp>

We examine the strategic use of recycled content standards (RCSs) under international duopoly.
RCSs require firms supplying the domestic market to use a certain proportion of recycled materials
as inputs. We demonstrate that, when there is no trade in recycled materials, two identical countries
both set strategically stricter or laxer RCSs. However, when there is trade in recycled materials,
it may be the case that one country sets a stricter RCS while the other sets a laxer RCS. When
a world supply constraint on recycled materials is not binding, the main source of the asymmetric
distortion in RCSs is a demand effect for recycled materials.

July 2005

Takumi Naito (Tokyo Institute of Technology)
"Growth, revenue, and welfare effects of tariff and tax reform: win-win-win strategies"
Journal of Public Economics
<tnaito@soc.titech.ac.jp>
We examine growth, revenue, and welfare effects of tariff and tax reform with
a two-good, two-factor endogenous growth model. Learning-by-doing and
intersectoral knowledge spillovers contribute to endogenous growth consistent
with incomplete specialization. We obtain two main results. First, trade
liberalization raises (or lowers) the growth rate if and only if the import
sector is more effective-labor-intensive (or capital-intensive). Second, we
can attain growth, revenue, and welfare gains by combining
consumer-price-neutral tariff and tax reform for growth enhancement with an
additional rise in the consumption tax on the less distorted good.

Kenji Fujiwara (Kobe University)

"Unilateral and Multilateral Gains from Trade in International Oligopoly"

Economic Record

<cfw00450@nyc.odn.ne.jp>
Constructing a two-agent model of international duopoly with increasing returns, this paper examines the potential gains from free trade. It is shown that under certain conditions, both agents in a country become worse off in free trade than in autarky with no redistribution. Further, the lump-sum compensation can never achieve a Pareto-improvement in such an economy. However, we can find a non-lump-sum redistributive scheme that makes nobody in the country worse off in free trade than in autarky.

Alan D. Woodland (University of Sydney) and Chisato Yoshida (Ritsumeikan University)
“RISK PREFERENCE, IMMIGRATION POLICY AND ILLEGAL IMMIGRATION”
Journal of Development Economics
<cyoshida@ec.ritsumei.ac.jp>
The paper analyzes the effects of government policy upon illegal immigration. The model used as a vehicle for this analysis is an extension of Ethier’s one-small-country model of illegal immigration to a two-country context. We distinguish between the cases of capital immobility and free capital mobility, and consider illegal immigration when there are border patrols by the government and when there are internal enforcement procedures in effect. Unlike previous researchers who have assumed risk neutrality, we examine the impacts of government policy when prospective illegal immigrants exhibit risk averse and risk loving behavior. The relaxation of the risk neutrality assumption leads to the possibility of multiple and unstable equilibria. Moreover, attitudes to risk and the probability of detection are shown to have implications for some equilibrium responses to tighter surveillance.

June 2005

Nobuhito Suga (Nagoya University)

"Reconsideration of Trade Patterns in a Chamberlinian-Ricardian Model"

Economics Bulletin

<suga@aurora.ocn.ne.jp>

This paper reexamines the patterns of trade in a Chamberlinian-Ricardian model by introducing a simple dynamic process of labor reallocation. Our analysis shows the following result. First, the patterns of inter-industry trade are determined by technical differences among countries. Second, whether intra-industry trade emerges depends not only on the cross-country technical heterogeneity but also on the size of a country and the expenditure share for differentiated products. Our main finding is that intra-industry trade can emerge in the trading equilibrium even if there is technical heterogeneity among countries.

Yasuhiro Takarada (Nanzan University) 
"Transboundary Pollution and the Welfare Effects of Technology Transfer" 
Journal of Economics 
<ytakara@ps.nanzan-u.ac.jp> 
We examine the welfare effects of a transfer of pollution abatement technology 
in a two-country model. In each country, one industry discharges
pollution as a byproduct of output, and the sum of domestic and
cross-border pollution decreases the productivity of the other industry.
We show the effects of technology transfer on the terms of trade,
pollution levels, and welfare. Technology transfer decreases the
pollution affecting each country under certain conditions. We derive and
interpret the conditions under which technology transfer enriches the
donor and the recipient. The results essentially depend on the trade
pattern and the fraction of cross-border pollution.

Toru Kikuchi (Kobe University)
"Network Externalities as a Source of Comparative Advantage"
Economics Bulletin
<kikuchi@econ.kobe-u.ac.jp>
This note examines how the network externalities of communications
activities and trading opportunities interact to determine the structure of
comparative advantage between countries. These interactions are 
obtained by constructing a two-country, two-sector model of trade 
involving a communications network sector. The role of network 
interconnectivity, which allows users of a network to communicate with 
users of another network, is also explored. A comparative advantage 
in the good that requires network services is held by the countries 
with interconnected networks.

May 2005

Fumiko Takeda (University of Tokyo) and Katsumi Matsuura (Hiroshima University)

"Trade and the Environment in Latin America: Examining the Linkage with the USA"

Economics Bulletin

<takeda@geosys.t.u-tokyo.ac.jp>

This paper investigates how trade of ‘dirty’ goods with the USA can affect the
environmental pollution in Latin American (LA). By controlling for trade openness,
the share of manufacturing in GDP, and the trade of pollution-intensive products
with USA, CO₂ emissions are estimated for 14 LA countries between 1986 and 1999.
Our results show that increasing exports of ‘dirty’ products to the USA tends to raise
CO₂ emissions in LA countries, while the opposite results occur for growing imports
of those goods from the USA. Since the effect of ‘dirty’ imports from the USA is larger
than the effect of ‘dirty’ exports to the USA, our results indicate that the trade of ‘dirty’
products with the USA on the whole reduces CO₂ emissions in LA countries during the
estimation period.

April 2005

Yin-Wong Cheung (University of California, Santa Cruz) and Eiji
Fujii (University of Tsukuba)
"Cross-Country Relative Price Volatility: Effects of Market Structure"
Review of International Economics
<efujii@sk.tsukuba.ac.jp>
Using annual data on nine manufacturing sectors of eighteen OECD
countries, the article studies the implications of market
structure for cross-country relative price variability. It is
found that, in accordance with predictions from a standard markup
pricing model, reductions in market competition, along with
increased nominal exchange rate volatility, are associated with
greater variability of cross-country relative prices. The market
structure also has similar effects on components of cross-country
relative price variability. The empirical findings are robust to
the inclusion of various control variables and alternative sample
specifications.

Shigeto Kitano (Wakayama University)

" The Government’s Foreign Debt in the Argentine Crisis "

Review of Development Economics

<kitano@eco.wakayama-u.ac.jp>

Though the government had adopted a currency board regime since 1991,
the Argentine economy suffered a currency crisis in 2002. It is shown that
currency crises can arise even under currency board systems in which the
central bank has enough international reserves to respond to arbitrary withdrawals
by individuals. The model implies that a government's rapid accumulation of
foreign debt should be included as a major predictor of currency crises.

Takumi Naito (Tokyo Institute of Technology)
"Tariff and tax reform: dynamic implications"
Journal of International Economics
<tnaito@soc.titech.ac.jp>
In an endogenously growing small open economy with a capital good and a
consumption good, we characterize the optimal combination of an import tariff
and consumption taxes under the revenue neutrality constraint. Focusing on the
case in which the economy imports the capital good, we obtain two main
results. First, consumption of the capital good is distorted more than the
consumption good at the optimum. Second, the optimal tariff rate is positive,
implying that free trade is not optimal even for a small open economy with no
market failure.

Hiroshi Mukunoki (Gakushuin University) and Kentaro Tachi (Nihon Fukushi University) 
"Multilateralism and Hub-and-Spoke Bilateralism" 
Review of International Economics
<hiroshi.mukunoki@gakushuin.ac.jp> 
The paper studies sequential negotiations of bilateral free trade agreements
in an oligopoly model. Expansion of trading blocs by overlapping trade agreements
allows an option of hub-and-spoke system and achieves multilateral free
trade as the equilibrium path, even if expansion of trading blocs by acceptance
of new members is infeasible. Results suggest that free trade areas (FTAs) tend
to expand more than customs unions (CUs). Lobbying by a producer can either
promote or undermine the realization of multilateral free trade by overlapping
FTAs.

Makoto Yano (Keio University) and Fumio Dei (Kobe University)

"Network Externalities, Discrete Demand Shifts, and Sub-Marginal-Cost Pricing"

Canadian Journal of Economics
<dei@kobe-u.ac.jp>
The introduction of a new product often causes a massive (discrete) demand shift to the new product.
This study demonstrates that if a large-scale demand shift to a new product is accompanied
by network externalities, it may result in "sub-marginal-cost pricing," by which the seller sets its price
below the marginal cost. This finding casts new light on dumping and safeguard issues in the real world.

March 2005

Akihiko Yanase (Takasaki City University of Economics)
"Pollution Control in Open Economies: Implications of Within-period Interactions for Dynamic Game Equilibrium"
Journal of Economics
<yanase@tcue.ac.jp>
This paper examines a two-country, dynamic game model of pollution control in the
presence of economic interactions between countries within a period, as well as
the environmental interaction between periods (i.e., a change in the stock of
global pollution). These economic interactions emerge because of changes in the
terms of trade of polluting goods or the market share of domestic polluting industries.
It is shown that if within-period externalities exist, a noncooperative equilibrium may
result in a smaller stock of global pollution in the steady state than does international
cooperation. Moreover, the properties of equilibrium paths depend on the direction
and size of such externalities. In addition, trigger strategy equilibria that achieve
the outcome of the collusive solution are examined.

Nobuhito Suga (Nagoya University)

"International Economies of Scale and the Gains from Trade"

Journal of Economics

<suga@aurora.ocn.ne.jp>

This paper presents a two-country trade model with external economies of scale
that emerge on an international level but are partially localized in each country.
First, we show that in the trading equilibrium, the larger country exports the good
produced in an industry with external economies of scale. Second, we investigate
the welfare effects of trade for the following two cases: (I) the case where external
economies are completely localized in autarky; (II) the case where external economies
are internationally effective in autarky. In Case (II), it is shown that trade can be
welfare-decreasing for both countries.

Masahiro Endoh (Keio University)
"Quality of Governance and the Formation of Preferential Trade Agreements"
Review of International Economics
<endoh@fbc.keio.ac.jp>
This paper investigates economic and political factors which explain the
presence or absence of Preferential Trade Agreements (PTAs). A model of
three countries with imperfect competition markets is employed for
theoretical analysis of political economy.  The validity of theoretical
results is tested by econometric analysis with a logit model. It is
shown that countries with similar incomes are more likely to form PTAs,
and that governments with low quality of governance have little
incentive to form PTAs.

Masahiro Endoh (Keio University)
"The Effects of the GSTP on Trade Flow: Mission Accomplished?"
Applied Economics
<endoh@fbc.keio.ac.jp>
This paper investigates whether the Global System of Trade Preferences
among Developing Countries (GSTP) achieves its intent to increase the
trade of capital goods between member countries.  For this purpose,
trade data disaggregated by the degree of commodity differentiation and
various GSTP regional dummies are employed in a gravity equation.
Estimation results say that the value of trade between GSTP member
countries has increased significantly since the formation of the GSTP in
1989, and the trade of differentiated commodities has increased
remarkably compared with other commodities.  Therefore, we can assert
that the mission of the GSTP has been accomplished successfully.

Masao Oda( Kansai University)

“On the New Export Sector in Developing Countries”
International Economic Journal
<moda@kansai-u.ac.jp>

Developing a three sectors three factors model with tariff, this paper considers
the condition under which an acceptance of direct investment is desirable
for developing countries. We show that an acceptance of direct investment
increase the output of both new export and traditional export sector and
promote the export-led growth in developing countries.

Masao Oda( Kansai University)

“Voluntary Import Expansion and Direct Investment”

Japanese Economic Review
<moda@kansai-u.ac.jp>

This paper analyzes the welfare effects of a market-share Voluntary Import Expansion (VIE)
in the presence of foreign direct investment utilizing a duality approach. Introducing
the cost burden of VIE explicitly, this paper considers the conditions under which
a market-share VIE is voluntary for the importing country. It is shown that the voluntary nature
of VIE depends on the capital import effects, the cost burden effects, and the price difference effects
and that a VIE is voluntary if it is accompanied by direct investment.

February 2005

Noritsugu Nakanishi and Toru Kikuchi (Kobe University)
"Expansion of Network Integrations: Two Scenarios, Trade Patterns, and Welfare"
Journal of Economic Integration
<nakanishi@econ.kobe-u.ac.jp>
We present two different scenarios of expanding the communication networks
(through which the intermediate business services are traded) and examine their
consequences on trade patterns in goods and welfare of the countries. The first scenario is
the "successive expansion" of a single network integration and the second one is
the "parallel expansion" of plural network integrations. We show that the former can
have harmful effects on the outside countries, while the latter can be "Pareto-improving"
in each stage of the network expansion.

Ryuhei Okumura and Dapeng Cai ( Nagoya University )
"Sustainable Constant Consumption in a Semi-open Economy with Exhaustible Resources"
Japanese Economic Review
<okumura@soec.nagoya-u.ac.jp>
To sustain constant consumption, Hartwick’s rule prescribes reinvesting all resource rents in reproducible capital.
However, Hartwick’s rule is not necessarily the result of optimization. In this paper, we address this insufficiency
by deriving a constant consumption path endogenously in a semi-open economy with an exhaustible resource,
which has full access to world goods and capital markets, while the resource flows are not internationally tradable.
Our findings show that, due to the essentiality of both capital and resource to the production process,
the economy transforms its domestic assets into foreign ones, ending up consuming a constant interest flow from the latter.

Akihiko Yanase (Takasaki City University of Economics)
"Dynamic Voluntary Provision of Public Goods and Optimal Steady-state Subsidies"

Journal of Public Economic Theory
<yanase@tcue.ac.jp>
This paper examines a differential game model of voluntary provision of a public good in which
private agents' contributions accumulate over time and derives subsidy rules that achieve
the socially efficient steady state. It is shown that the optimal subsidy rule is a simple one
when agents use the open-loop strategy, while under Markovian strategies it intricately
depends on the parameters of the economy.

Akihiko Yanase (Takasaki City University of Economics)
"Reconsideration of the Relationship between Environmental Regulation and Comparative Advantage:
The Role of Environmental Externalities on the Production Side"

Keio Economic Studies
<yanase@tcue.ac.jp>
The conventional view of the literature on trade and the environment is that
tighter environmental policy leads to a country's comparative disadvantage
in polluting goods. This paper re-examines such the relationship between
environmental policy and comparative advantage by introducing negative externalities
of pollution on the production side (productivity and/or factor endowments) into
the standard Heckscher-Ohlin model. It is shown that, depending on the externality effects,
tighter environmental policy may lead to a decrease in the autarky relative price
of a pollution-intensive good.

Yin-Wong Cheung (University of California, Santa Cruz), Menzie
Chinn (University of Wisconsin, Madison) and Eiji Fujii
(University of Tsukuba)
"Dimensions of Financial Integration in Greater China: Money
Markets, Banks and Policy Effects"
International Jounral of Finance and Economics
<efujii@sk.tsukuba.ac.jp>
The financial linkages between the People’s Republic of China
(PRC) and the other Greater China economies of Hong Kong and
Taiwan are assessed, and compared against those of the PRC with
Singapore, Japan and the United States. For both sets of links,
there is evidence that ex post uncovered interest parity tends to
hold over longer periods, and the magnitude of the parity
deviations are shrinking over time. The deviations depend upon
the extent of capital controls, and in certain cases, exchange
rate volatility. We, then, discuss how relevant this measure of
international financial integration is for domestic financial
intermediation overall. Using an error correction model, we find
that for the PRC and Taiwan bank lending rates and interbank
rates share essentially no covariability. The utter disconnection
of bank lending rates from interbank rates makes a stark contrast
with the results for the United States that indicate one-for-one
comovement between the two rates. These empirical results imply
that, while the money markets of the PRC are increasingly linked
to money markets in the rest of the world, the banking sector -
the main source of capital for Chinese firms - remains insulated.

Jota Ishikawa (Hitotsubashi University) and Tomohiro Kuroda (Hitotsubashi University)
"Export Subsidies versus Export Quotas with Incompletely Informed Policy Makers"
 Japanese Economic Review
< jota@econ.hit-u.ac.jp>  <ce00720@srv.cc.hit-u.ac.jp>
This paper analyzes export subsidies (price incentives) and export quotas (quantity controls)
in the Brander-Spencer (1985) model when policy makers have limited information on demand
and cost structures.  We examine necessary or sufficient information for policy makers to determine
the right policies. It is crucial that they know the elasticity values of the slope of the inverse demand
curve and the market share. It is also shown that for policy makers, export quotas are superior to
export subsidies under certain conditions.

January 2005

Nobuhito Suga (Nagoya University)

"An Analysis of Transboundary Pollution and the Gains from Trade: Reconsideration"

Pacific Economic Review

<suga@aurora.ocn.ne.jp>

This paper investigates the effects of transboundary pollution on trade and welfare
in a two-country, tow-good, one-factor model, in which pollution is treated as a negative
cross-industry externality. It is shown that trade may improve countries' natural environment
and consequently raises the countries' welfare if a comparative advantage in a pollution-
producing good is held by a country that greatly surpasses the other in pollution abatement
technology. This result has not been obtained from existing models of this type.

Jota Ishikawa (Hitotsubashi University) and Kazuharu Kiyono (Waseda University)
"Green-Gas Emission Controls in an Open Economy"
International Economic Review
To examine how greenhouse-gas emission controls affect country's industrial
and trade structures, this paper presents an open economy model that has
both Ricardian and Heckscher-Ohlin features. We specifically compare
emission quotas, emission taxes and emission standards. The patterns of
production and trade critically hinge on those policy tools. It is shown
that a domestic emission control may lead to carbon leakage and may not
reduce the world emission and that emission standards may work as a "hidden"
production subsidy towards an emission-intensive industry.

Yunfang Hu (Kobe University) and Kazuo Mino (Osaka University)
"Schooling, Working Experiences, and Human Capital Formation"
Economics Bulletin
<hu@rieb.kobe-u.ac.jp>, <mino@econ.osaka-u.ac.jp>
This paper assumes that human capital is a composite of two types of
 knowledge and skills: one is accumulated by formal education in schools
 and the other is accumulated through working experiences in production
 activities. Introducing such a concept of human capital into the standard
 Lucas-Uzawa model of endogenous growth, we show that a higher rate of
 long-run growth is not necessarily associated with a higher level of education
 attainment.