December 2006


Kazuo Mino (Osaka University), Kazuo Nishimura (Kyoto University),

Koji Shimomura (Kobe University) and Ping Wang (Washington University in

St.Louis and NBER)

"Equilibrium Dynamics in Discrete-Time Endogenous Growth Models with

Social Constant Returns"

Economic Theory


The existing literature establishes possibilities of local determinacy and

dynamic indeterminacy in continuous-time two-sector models of endogenous growth

with social constant returns. The necessary and sufficient condition for local

determinacy is that the factor intensity rankings of the two sectors are consistent in

the private/physical and social/value sense. The necessary and sufficient

condition for dynamic indeterminacy is that the final (consumable) good sector is

human (pure) capital intensive in the private sense but physical (consumable) capital intensive

in the social sense. This paper re-examines the dynamic properties in a discrete-time

endogenous growth framework and finds that conventional propositions obtained in continuous

time need not be valid. It is shown that the established necessary and sufficient conditions

on factor intensity rankings for local determinacy and dynamic indeterminacy are neither

sufficient nor necessary, as the magnitudes of time preference and capital depreciation rates both

play essential roles.


Yunfang Hu (Kobe University)

"Human Capital Accumulation, Home Production and Equilibrium Dynamics"

Japanese Economic Review


In this paper, we construct a three-sector endogenous growth

model in which long-run growth is propelled by human capital accumulation. We

show that although the addition of a home sector to the standard two-sector

endogenous growth model preserves the well-behaved balanced-growth

equilibrium properties, it generates new transitional dynamics around the balanced

growth path. It is shown that, when there is a positive shock to physical

capital, our model is more likely to exhibit paradoxical growth than are

standard multisector endogenous growth models that exclude home production.

Our analysis adds new results to those from the related literature on



Yasuhiro Takarada (Nanzan University)

"Welfare Effects of International Income Transfers under Transboundary Pollution"

Environmental Economics and Policy Studies


This paper examines the welfare effects of international income transfers

in a two-country, two-good model with transboundary pollution. Most

existing studies have assumed that pollution negatively affects the

consumer's utility function instead of influencing production. In our

model, there is interindustry interaction caused by pollution. First, we

show the effects of aid on each country's welfare. Second, we show that

untied aid improves world welfare if the marginal propensity to consume

the polluting good in the donor country is larger than in the recipient

country. We also derive the condition for Pareto-improving untied aid.

The source of welfare improvement is productivity gains induced by a

reduction in pollution.


Tsuyoshi Toshimitsu (Kwansei Gakuin University)

"A Note on Quality Choice, Monopoly, and Network Externality" 

Journal of Industry, Competition and Trade


Introducing network externalities into a model of vertically differentiated products, Lambertini and Orsini (2001, 2003) analyze the implications of a monopolistfs quality choice for social optimum. Moreover, they examine how the network externality affects quality, quantity, price, and the social surplus. In this note, by looking at the nature of the cost function and the degree of the network externality, we reconsider their results, at least some of which depend upon the specificity of the cost function.


November 2006


Yuqing Xing iInternational University of Japanj and Laixun Zhao (Kobe University)

gReverse Imports, Foreign Direct Investment and Exchange Ratesh

Japan and the World Economy


This paper investigates linkages among greverse importsh, foreign direct investment, and exchange rates. As an example we have in mind the competition in the Japanese market of a Japanese multinational firm and a Chinese domestic firm. Products are differentiated based on Japanese consumersf brand name recognition. The model shows that yen appreciation leads to an increase in Japanese production in China and greverse importsh, and a decrease in Japanese domestic production. Due to the barriers in brand name, the exports of the Chinese firm could fall, because the increase of reverse imports may erode the market share of the Chinese firm, even though total exports from China increase. Further, we find that yen appreciation may improve the profits of the Japanese firm and welfare in Japan under reverse imports, against conventional wisdom. The predictions of the model fit well with the actual numbers, and shed light on the current debate on the Chinese currency.


Kenji Fujiwara (Kwansei Gakuin University)

gA Stackelberg game model of dynamic duopolistic competition with sticky pricesh

Economics Bulletin


We develop the following Stackelberg game model of dynamic duopoly with sticky prices; the

leader chooses its time profile of outputs to maximize the discounted sum of profits, while the

follower chooses the optimal output to maximize the instantaneous profit as a myopic profit maximizer at each

point of time. Then, we compare the resulting equilibrium outcomes with those in a Stackelberg

equilibrium without price stickiness.


October 2006


Kimura, Fukunari (Keio University) and Kozo Kiyota (Yokohama National University)

"Foreign-owned versus Domestically-owned Firms: Economic Performance in Japan"

Review of Development Economics


This paper utilizes micro-panel data for firms located in Japan and

examines differences in corporate performance between foreign-owned and

domestically-owned firms in the 1990s. We find that foreign-owned firms

not only reflect superior static characteristics, but also achieve faster

growth. Moreover, foreign investors appear to invest in firms that may not

be immediately profitable, but those that are potentially the most

profitable in the future. There is also no evidence that foreign

investor is "foot-loose." These imply that foreign investors bring useful

firm-specific assets into the Japanese market, which may work as an

effective catalyst for necessary structural reform.


Kimura, Fukunari (Keio University) and Kozo Kiyota (Yokohama National University)

"Exports, FDI, and Productivity of Firm: Dynamic Evidence from Japanese Firms"

Review of World Economics / Weltwirtschaftliches Archiv


This paper examines the relationship between exports, foreign direct

investment and firm productivity. Using longitudinal panel data on

Japanese firms, it is found that the most productive firms engage in

exports and foreign direct investment, medium productive firms

engage in either exports or foreign direct investment, and the least

productive firms focus only on the domestic market. Moreover, exports and

foreign direct investment appear to improve firm productivity once the

productivity convergence effect is controlled for. Firms that retain a

presence in foreign markets, either by exports or foreign direct

investment, show the highest productivity growth, which contributes to

improvements in national productivity.


Yunfang Hu (Kobe University), Kazuo Nishimura (Kyoto University), Koji Shimomura (Kobe University)

gThree-Factor Models of International Tradeh

Asia-Pacific Journal of Accounting and Economics


Based on the Jones (1971) model, we construct two dynamic models of international trade in which the

rate of time preference is either constant or time-varying. The main purpose is to study whether and

under what conditions the results derived from the Jones model still hold in the dynamic framework. It

is shown that the results of dynamic models may be similar or different to those obtained in the static

model. For example, it is possible that, in both static and dynamic models, an increase in a commodity

price raises this commodity's output and the rate of return to the specific factor in this sector.

However, the effect on the wage rate may be different due to the factor accumulation impact in the

dynamic framework.


Junko Doi (Kansai University/Kyoto Sangyo University), Kazumichi Iwasa (Kobe University), and Koji Shimomura (Kobe University)

gIndeterminacy in the free-trade worldh

Journal of Difference Equations and Applications


We show that indeterminacy arises in a discrete-time competitive two-

country dynamic model of international trade in which international fac-

tor immobility, externalities, imperfect competition, and government in-

tervention are assumed away. The present model is a standard dynamic

trade model in the sense that there is neither an international credit mar-

ket nor international factor mobility, and these intrinsic features make

an equilibrium path generally Pareto-suboptimal and a source of inde-

terminacy. While indeterminacy is derived only for " knife-edge" in the

literature, it is derived when parameters belong to a "positie-measure" set.

Moreover, the condition for indeterminacy is implied by the condition for

the existence of a steady state.


Naoto Jinji (Okayama University)
"International Trade and Renewable Resources under Asymmetries of Resource Abundance and Resource Management"
Environmental and Resource Economics
<jinji 'at'>
This paper examines the interaction between relative resource abundance and resource management regimes in determining trade patterns and gains from trade in a two-country model with a renewable resource.  A model developed by Brander and Taylor (1997b) is extended.  It is shown that relative resource abundance determines trade patterns if resource abundance is similar in both countries and the relative demand for the resource good is moderate, or if resource abundance is sufficiently different and the relative demand is not so high.  Otherwise, a difference in resource management regimes determines trade patterns.  Even under an open-access regime, the resource-scarce country gains from trade unless resource abundance is similar and the relative demand is low.


September 2006


Tsuyoshi Toshimitsu (Kwansei Gakuin University)

gEffect of a Tariff on the Environment and Welfare: The Case of an Environmental Differentiated

Duopoly in a Green Marketh

Japan and The World Economy


Employing a model of environmental quality-differentiated products, we analyze the effect of an ad

valorem tariff on the unit emission level of the products, the environment, and social welfare in the

Bertrand and the Cournot duopoly cases, respectively. We show that the effect of the tariff policy

depends on the mode of market competition and the degree of marginal social valuation of environmental



Akihiko Yanase (Takasaki City University of Economics)
"Dynamic Games of Environmental Policy in a Global Economy: Taxes versus Quotas"

Review of International Economics
The effects of environmental policy on the global environment as

an international public good with a stock externality and national

welfare are examined in a model with trade in a polluting commodity.

The welfare effects of environmental policy, decomposed into terms

of trade, abatement cost and environmental damage effects, induce

governments to adopt a strategic use of their policy measures.

In the absence of international cooperation on environmental policy,

it is demonstrated that the emission tax game brings about larger

strategic distortions than the emission quota game.


Kenji Fujiwara (Kwansei Gakuin University)

gTrade patterns in an international mixed oligopolyh

Economics Bulletin


Developing a two-country model of international mixed oligopoly,

this note makes clear the determinant of trade patterns. We give

a simple formula to predict bilateral patterns of trade which relates

the degree of a country's privatization to the trading country's

competitiveness. If a semi-public firm is not sufficiently privatized

in a country, this country exports the non-competitive good.


August 2006


Yuqing Xing (International University of Japan)

"Strategic Environmental Policy and Environmental Tariffs"

Journal of Economic Integration


This paper uses a three-stage game to analyze how environmental tariffs

affect the strategic behavior of a government in designing environmental

policy. The game is based on an international duopoly model with

detrimental externality in production and asymmetric environmental

policies between two countries. It shows that the welfare effect of the

foreign country's strategic environmental policy on the home country is

ambiguous. In the circumstance that the home country would be worse off

due to the lenient environmental policy of the foreign country, there

exists an optimal environmental tariff. If the home country imposes the

optimal tariff on the pollution-intensive imports, any deviation from

the first best environmental policy by the foreign country would make

the home country better off. In addition, the implementation of the

environmental tariff would mitigate the motivation of the foreign

country to pursue strategic environmental policy, and drive the lenient

environmental standard toward the efficient level. The theoretical

results imply that, in an open economy with non-harmonized environmental

standards, imposing environmental tariffs on imports from the countries

with lax environmental regulations would correct the adverse welfare

effect, and more importantly induce the upward harmonization on

environmental policy across countries.


July 2006


Shigeto Kitano (Wakayama University)

gCapital Controls, Public Debt and Currency Crisesh

Journal of Economics


This paper examines the possibility that contrary to conventional

wisdom, capital controls accelerate currency crises. Theoretical

analysis shows that capital controls can constitute an additional burden

on government budget and so bring forward the onset of crises. Since

perfect capital mobility does not occur, domestic interest rates may

deviate from world interest rates. High interest rates under capital

controls create an additional cost of servicing outstanding domestic

public debt, precipitating crises. Even though the government can delay

crises with capital controls, welfare may be worse than in a situation

with perfect capital mobility.


Koji Shimomura (Kobe University) and Dipankar Dasgupta (Indian Statistical Institute)

"Public Infrastructure, Employment and Sustainable Growth in a Small Open Economy with and Without Foreign Direct Investment"

Journal of International Trade and Economic Development


The paper builds a theoretical model of endogenous growth motivated by the recent Indian

paradox of an improving GDP growth rate in the face of unsatisfactory employment

growth rate. The source of the problem is believed to be inadequate growth of manufacture

for the absorption of unskilled or semi-skilled labour in rural sectors. The paper studies

the impact of free trade on employment and GDP growth in a small, developing economy

in the absence as well as presence of foreign direct investment. The model also

recognizes the importance of public infrastructure accumulation to support the growth

process. The results indicate that free trade with or without a corresponding free inflow

of foreign capital into the manufacturing sector has a positive impact on employment and

GDP growth. However, the beneficial effect is stronger in the presence of foreign capital.

Foreign and domestic capital grow at equal rates in equilibrium.


Yushi Yoshida (Kyushu Sangyo University) and Hiro Ito (Portland State University)

gHow do the Asian Economies Compete with Japan in the US Market? Is China Exceptional? A Triangular Trade Approachh

Asia Pacific Business Review


We apply a trilateral trade approach on how Japanese exports and investment to China, or seven other Asian economies, affect Chinese, or seven Asian economiesf, exports to the US market. The results suggest that while Chinese and Japanese exports are directly competitive in US markets, Chinese exports to the US are supported partly by Japanese exports to China. The positive correlation between Japanese exports to China and Chinese exports to the US is explained by vertical trade between Japanese multinationals and their affiliates in China. Indonesian and Philippine exports are also competing with Japanese exports in US markets, though the extent of the competition is much higher for China than for these countries.


June 2006


Jota Ishikawa (Hitotsubashi University) and Hiroshi Mukunoki (Gakushuin University)

"Effects of Multilateral Trade Liberalization on Prices"

Review of International Economics

To analyze the effects on prices of simultaneous tariff reductions by

multiple importing countries, we construct a simple three-country model

where a good is produced by a monopolist with non-constant marginal cost

and imported by two countries. We specifically compare two

representative tariff-reduction formulas: the "fixed-amount" and the

"uniform percentage" reductions. The uniform percentage reductions may

increase the consumer price in the importing country whose initial

tariff is lower. Thus, importing countries with relatively low tariffs

may prefer a bilateral trade agreement to a multilateral one to ensure

consumer gains.


Hyun-soo Ji (DAVA Co.LTD.) and Ichiroh Daitoh (Tohoku University)

"Interconnection Agreement between Internet Service Providers and the Optimal Policy Intervention:

The Case of Cournot-type Competition under Network Externalities"

Japanese Economic Review


We derive the optimal subsidy policy for an interconnection agreement between two symmetric ISPs competing a la Cournot in a network service market. The interconnection quality agreed upon is lower than the socially optimal level, as suggested by Crémer, Rey and Tirole (2000). In the basic model where both ISPs compete in the domestic market, the optimal investment subsidy rate depends positively on the strength of network externalities. In the extended model where home and foreign ISPs compete in the home market, the optimal subsidy rate for the home government is higher than in the basic model.


May 2006


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

"Optimal commodity taxation with a representative agent"

Review of Development Economics


It is argued that the task of describing the optimal vector of commodity taxes is trivialized by the

traditional assumption of a price-taking representative agent; that, in particular, the assumption of a

representative agent ensures that the null vector is optimal.


Junko Doi (Kansai University), Kazuo Nishimura (Kyoto University) and Koji Shimomura (Kobe University)

"A two-country dynamic model of international trade and endogenous growth: multiple balanced growth

paths and stability"

Journal of Mathematical Economics


We formulate a two-country endogenous growth model which explain joint determination of long-run trade

patterns and world growth rates. After providing the existence and local stability of the continuum of

balanced growth paths, we show that main standard trade propositions hold under some modifications and

that, subject to certain conditions concerning social and private rankings of factory intensities

between production sectors, the higher is the growth rate, the smaller is the volume of international

trade among balanced growth paths in the continuum.


Toru Kikuchi (Kobe University), Koji Shimomura (Kobe University) and D.-Z Zeng (Kagawa University) 

"On Chamberlinian-Ricardian Trade Patterns"

Review of International Economics


This study provides a simple, many-industry model of trade which emphasizes the interaction between

cross-country technical heterogeneity (i.e., a Ricardian aspect) and monopolistic competition among

producers of differentiated products (i.e., a Chamberlinian aspect) as determinants of trade patterns. It

is shown that the emergence of intra-industry trade is crucially dependent on the shape of the

technology index schedule, which is obtained as a step-function. 


Kazuo Mino (Osaka University)

"Voracity vs. Scale Effect in a Growing Economy without Secure Property Rights"

Economics Letters


This paper extends the standard model of growth with insecure property

rights by introducing variable labor supply and increasing returns to

scale. It is assumed that capital stock is jointly owned by multiple

interest groups and that each group participates production activities

by supplying its labor force. In this setting, there are two opposing

factors that affect growth: over consumption in the absence of secure

property rights and the scale effect due to the presence of increasing

returns. The growth performance of the economy thus depends on which

factor dominates.


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

"Technology, Preference Structure, and the Growth Effect of Money Supply"

Macroeconomic Dynamics


This paper studies the growth effect of money supply in the presence of increasing

returns and endogenous labor supply. By using a simple model of endogenous growth

with a cash-in-advance constraint, it is shown that the growth effect of money supply

is closely related to the specifications of preference structures as well as production

technology. If the production technology exhibits strong non-convexity or if the utility

function has a high elasticity of intertemporal substitution, then there may exist dual

balanced-growth equilibria and the impact of a change in money growth depends on which

steady state is realized in the long run. If the intertemporal substitutability in

felicity is higher than one, the balanced growth equilibrium is uniquely given. However,

again, the effect of money supply on growth depends on the degree of increasing returns

in production.


April 2006

Takeshi Ikeda (Kobe International University)
"Does a tariff really enhance welfare?"
Japan and the World Economy
Tanaka (1993) argues the small reciprocal tariff reduces the average costs of firms and enhances the world welfare under a free entry Cournot oligopoly with increasing returns to scale. This paper shows the welfare improving effect which was found in Tanaka (1993) results from the relaxation of the excess entry. We also find, however, such a world welfare enhancing tariff is not valid because of the instability of the Cournot solution. It indicates that we must take great care about the stability in using the Cournot oligopoly model with increasing returns to scale.


Laixun Zhao (Kobe U.) and Yuqing Xing (International Univ. of Japan)
"Global Production and Currency Devaluation"
Review of International Economics
We model the production allocation choices of a multinational enterprise (MNE) in a three-country framework -- one northern country and two southern ones. Products made in the South are of lower quality than those made in the North. Substitutability between goods differs due to variations in product quality. We investigate how exchange rates affect production, employment and welfare, and find that currency devaluation from different countries brings contrasting results. In particular, an appreciation in the southern country (X) producing the lowest-quality good with the least cost may reduce production (employment) in the North, while an appreciation in the other southern currency (Y) always does the opposite. A northern depreciation against both southern currencies may increase production in country X, but always reduces that in country Y. These arise because the MNE shifts production globally to minimize costs. Northern welfare always falls following currency appreciation in southern countries. 


Laixun Zhao (Kobe U. ) and  Kenji Kondoh (Chukyo U.)
"Temporary and Permanent Immigration under Unionization"
Review of Development Economics
This paper investigates permanent and temporary immigration and remittance under the coexistence of unionized and non-unionized manufacturing firms in a two-sector economy. The impacts of immigration and remittance on respectively wages, employment, the union-nonunion wage gap and national welfare are analyzed. It is found that both permanent immigration (economy-wide) and temporary immigration in agriculture bring positive effects on most variables (except the competitive wage), but widens the wage gap and causes income redistribution in the host country. However, if temporary immigrants work in manufacturing only, then all wages and the union-nonunion wage gap fall. That is, workers become more equally paid but poorer. In addition, remittance and globalization cause negative effects on union workers and employers. It is perhaps such consequences and the income redistribution effect of immigration that cause the media to paint a negative image of immigration.


Yunfang Hu (Kobe University), Koji Shimomura (Kobe University)
gStatus-Seeking, Catching-Up and Comparative Statics in a Dynamic Heckscher-Ohlin Modelh
Review of Development Economics,
This paper examines a two-country dynamic general equilibrium model with status-seeking agents.
We show that the introduction of status-seeking behavior brings about new properties in equilibrium
dynamics. While there exists a continuum of steady states in the standard dynamic models, the present
framework demonstrates that, under some conditions, there uniquely exists an incompletely specialized
steady state, which is locally saddle-point stable. Therefore, catching-up and overtaking phenomena
seen in economic development can be explained, and comparative statics analysis also is made possible.
Our comparative statics analysis illustrates, for example, that trade pattern is determined in the Heckscher-
Ohlin manner; the patient country acts just like a capital abundant one to export the capital-intensive good.
Furthermore, as distinct from the existing literature, the present study shows that the existence of
an incompletely specialization steady state can be ensured even if the two countries conduct different policies.

Jota Ishikawa (Hitotsubashi University) and Hiroshi Mukunoki (Gakushuin University)
"Spillover Effects of Economic Integration in a Three-Country Model"
Japanese Economic Review
Using a simple monopoly model, we examine the effects of economic integration.
We show that the number of markets and the shape of marginal revenue curves are
crucial to evaluate economic integration when the marginal cost is not constant.
The effects of tariff-reductions in a three-country model are in contrast with
those in a two-country model. The effects also depend on what trade policy
the non-member country adopts. When both importing countries simultaneously
lower their tariffs, the Metzler paradox may arise.


Chi Young Choi (University of New Hampshire) and Kiyoshi Matsubara (Nagoya City University)
gHeterogeneity in the Persistence of Relative Prices: What Do the Japanese Cities Tell Us?h
Journal of the Japanese and International Economies
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This paper employs diverse measures of persistence to analyze the
convergence speed of intercity relative prices in Japan using consumer
price subindices during 1970-2002.  Regardless of the persistence measures,
the median estimated half-lives are found to be less than two years in the
vast majority of CPI items considered, which is compatible with economic
models based on price rigidities. However, there exists a large
heterogeneity in the persistence not just between tradables and
nontradables items as is widely known, but within the categories of
tradables or nontradables. The heterogeneity is substantive across cities
in each CPI item as well. Our findings are robust to a subsample analysis
though it points toward a presence of structural change around 1985. We
conjecture that the extent of heterogeneity across CPI items is linked to
the degree of tradability and market structure, while physical distance and
relative city size may play some roles in the heterogeneity across cities.


March 2006

Kenji Fujiwara (Kobe University)
"Why Resisting Globalization Can be Reasonable"

Economics Bulletin
A two-agent model of international trade with oligopoly and increasing returns is proposed to address
why there have been persistent anti-trade-liberalization movements. It is shown that all of a country's
residents lose from trade under certain conditions on the cross-country cost structure.

Rui Ota (Johns Hopkins University)

"Adjustability in Production and Dynamic Effects of Domestic Competition Policy"

Journal of International Trade and Economic Development


This study explores the effect on trade balance of suppressing competition in domestic non-tradable sector
through the interaction between the short-run adjustment and the long-run adjustment in production process. 
Constructing a model that can capture a more short-run aspect than Yano (2001), this study demonstrates
that the effect depends on the factor intensity ranking between the tradable sector and the non-tradable sector.
In this model, a change in the price of the tradable good at time 0 plays an important role to explain this result.


Jota Ishikawa (Hitotsubashi University) and Tomohiro Kuroda (Nagoya Gakuin University)

"How effective are emission taxes in an open economy?"
Review of Development Economics

This paper compares emission taxes with other taxes from the viewpoint of emission reduction
in an open economy. Using a simple monopoly model, we show that emission taxes may not be
very effective to protect environment because of the spillover effects between markets stemming
from non-constant marginal costs and transboundary externalities. Other taxes such as production
taxes and tariffs are more effective under certain conditions. Thus, an easy application of emission
taxes should be discreet in the open economy framework.


Naoto Jinji (Okayama University) and Tsuyoshi Toshimitsu (Kwansei Gakuin University)
"Optimal Policy for Product R&D with Endogenous Quality Ordering: Asymmetric Duopoly"
Australian Economic Papers
We examine the optimal R&D subsidy/tax policy under a vertically
differentiated duopoly.  In a significant departure from the existing
work, we consider the case of asymmetric costs of product R&D where
there is a small technology gap between firms.  In our analysis, the
endogeneity of quality ordering is explicitly taken into account.  We
demonstrate the possible anti-leapfrogging effect of R&D
subsidy/tax policy.  By committing to a firm-specific subsidy
contingent on firms' quality choices, the government can
not only correct distortions in product quality but also select the
socially preferred equilibrium.  The latter role is fulfilled by
preventing the technologically inferior firm from becoming a quality
leader in the industry.  Both Bertrand and Cournot cases are analyzed.

Toru Kikuchi (Kobe University) and Koji Shimomura (Kobe University)
"On dynamic Chamberlin-Heckscher-Ohlin trade patterns"
Economics Bulletin
Applying Atkeson and Kehoe's (2000) dynamic model to the dynamic
Chamberlin-Heckscher-Ohlin approach, we examine the role of timing of
development (e.g., removal of trade barriers) as a determinant of trade


February 2006


Toru Kikuchi (Kobe University) and Koji Shimomura (Kobe University)
"A two-country dynamic model with endogenous time preferences"
Keio Economic Studies

This paper formulates a two-country by two-factor by two-good dynamic
general equilibrium model of international trade with endogenous time
preferences. After proving the existence, uniqueness and local
saddlepoint stability of the steady state, we apply the present dynamic
model to a trade issue concerning international technology transfer in

order to show that the effect of once-for-all technology transfer upon

the donor country may differ between the dynamic model and the standard
static Heckscher-Ohlin model.

Makoto Yano (Keio University) and Fumio Dei (Kobe University)
"Network Externalities, Lexicographic Demand Shifts, and Marginal Cost Dumping"
Keio Economic Studies
In many cases, dumping involves a massive demand shift from domestic products
to competing foreign products that are newly introduced to the domestic market.
This study presents a new way of modelling such a demand shift relating to network
externalities and demonstrates that the monopolistic supplier of a new product may

sell at a price below the marginal cost. This result provides a new explanation for

what may be called marginal cost dumping.

January 2006


Toru Kikuchi (Kobe University) and Koji Shimomura (Kobe University)
"A New Dynamic Trade Model of Increasing Returns and Monopolistic
Review of Development Economics

This paper formulates a two-country by two-factor by two-good dynamic

Chamberlin-Heckscher-Ohlin model of international trade with endogenous time preferences. After

proving the existence, uniqueness and local saddlepoint-stability of the steady state, we examine the

relationship between initial factor endowment and trade patterns in the steady state.

It will be shown that (i) given that the representative household in each country supplies an equal

amount of labor, only intra-industry trade occurs in the steady state and (ii) other things being equal,

the country with higher labor efficiency becomes the net exporter of the labor-intensive good.