December 2008
Kenji Fujiwara (Kwansei
Gakuin University)
“Why environmentalists resist trade liberalization”
Environmental and Resource Economics
<kenjifujiwara@kwansei.ac.jp>
We build a two-country differential game model of polluting oligopoly to
consider the effects of trade liberalization. As in static models, the opening
of trade promotes competition but expands the global pollution. Characterizing
open-loop and feedback strategies, we derive a sufficient condition for losses
from trade. This losses-from-trade proposition could provide a rationale for
persistent resistance to globalization by environmentalists.
October 2008
Fuat Sener (Union
College) and Laixun Zhao (Kobe University)
"Globalization, R&D and the iPod Cycle"
Journal of International Economics
<zhao@rieb.kobe-u.ac.jp>
This paper constructs a dynamic scale-free
North-South model of trade with endogenous innovation. In the North a
local-sourcing-targeted race and an outsourcing-targeted R&D race take
place simultaneously within each industry. The former results in the winner
firm manufacturing in the North, while the latter culminates in the winner
firm’s immediate outsourcing to the South, generating the iPod
cycle. We study three aspects of globalization: reductions in the
resource-requirement in outsourcing-targeted R&D, increased subsidies to
outsourced production, and reduced Southern imitation due to TRIPs. Each event boosts outsourcing-targeted R&D and
increases the frequency of iPod cycles. The aggregate
innovation rate rises despite a possible fall in local-sourcing-targeted
R&D, and the North-South relative wage decreases.
Jung Hur (Sogang University) and Laixun
Zhao (Kobe University)
"Labor-Management
Bargaining, Labor Standards and International Rivalry"
Journal of Economic Behavior &
Organization
<zhao@rieb.kobe-u.ac.jp>
Using the labor union’s bargaining power
as an indication of government policy on labor standards issues, we analyze the
competition between a domestic (North) firm and a foreign (South) firm, and
their relationship with optimal labor standards (LS). First, we show that the optimal
level of LS is higher when labor unions are employment-oriented than when they
are not. Second, it is higher under free trade than under the optimal tariff
system if labor unions are employment-oriented. Third, ‘a race to the bottom’
of LS occurs in the case of wage-oriented unions. Fourth, the North’s imposing
a tariff to force the Southern government to raise its LS is effective only if
the Southern union is wage-oriented. In order to raise Southern LS, both
countries may need some deeper form of economic integration, if the North does
not want to abandon its free trade system.
Shingo Ishiguro (Osaka University) and Laixun Zhao (Kobe University)
"Raising Wages to Deter Entry in
Unionized Markets"
Japanese Economic
Review
<zhao@rieb.kobe-u.ac.jp>
This paper
investigates the strategic effects of new entry into product markets under a
unionized oligopoly where entry and wage negotiations are sequential. When both
an incumbent and an entrant hire unionized workers, the incumbent has
incentives to raise the wage, because a higher wage strengthens the bargaining
position of the union relative to the entrant at subsequent negotiations, which
then discourages the latter to enter. We also show that entry is more likely to
be deterred (accommodated) if the union is wage (employment) oriented and that
raising unemployment compensation during recession kills two birds with one
stone — it reduces the burden of the unemployed and induces new entry of firms,
creating more employment opportunities. However, during a business boom, our
results predict that reducing unemployment compensation is a better policy.
Laixun Zhao (Kobe University)
"International
Labor Standards and North-South Competition"
The World Economy
<zhao@rieb.kobe-u.ac.jp>
This paper models the economic aspects of
labor standards in an oligopolistic framework of
three countries, incorporating labor-management negotiations in the North and monopsonic labor markets in Southern countries. Different
from the literature, a higher LS not only incurs a higher
cost, but also benefits workers and induces them to work harder. Because of
these links, Northern intervention, via import taxes or minimum LS regulation,
may often have perverse effects on Southern countries. Specifically,
imposing an unconditional tariff against a certain Southern country to force up
its LS does not work. Further, the unconditional tariff would shift production
to another country. These shed light on why developing countries oppose
including LS in WTO negotiations. However, a LS-contingent tariff, or a minimum
LS regulation is effective in raising LS in Southern countries, but the utility
of the Northern labor union may fall. Incorporating altruism and humanitarian
concerns mitigates the effects of unconditional tariff policies. Finally, as
the empirical evidence shows, we demonstrate that multinational enterprises
choose to locate in those developing countries whose LS is relatively higher
rather than lower.
Jota Ishikawa (Hitotsubashi
University), Yoichi Sugita (Columbia University) and Laixun
Zhao (Kobe University)
"Corporate Control, Foreign Ownership Regulations and Technology
Transfer"
Economic Record
<zhao@rieb.kobe-u.ac.jp>
Multinationals are often required to form joint ventures (JVs) with local firms
when entering the host country market. Explicitly taking corporate control into
account, we explore the relationship between technology transfer and foreign
ownership regulation in the presence of technology spillovers from JVs to local
firms. It is shown that foreign ownership regulations may facilitate both
technology transfer and spillovers when the multinational has corporate
control. Under corporate control by the local partner firm, however, such
regulations may hamper technology transfer.
Takeshi Ikeda (Kobe International University) and
Tatsuhiko Nariu (Kyoto
University)
"Third-degree Price Discrimination
in the Presence of Asymmetric Consumption Externalities"
Journal of Industry, Competition and
Trade
<ikeda@kobe-kiu.ac.jp>
In this paper, we consider third-degree price
discrimination in two markets in the presence of asymmetric consumption
externalities; we establish that under plausible conditions, a firm reduces its
price in the market with low price elasticity of demand. The firm can increase
its profits by reducing the price for these consumers and enlarging the demand
for other consumers, provided that positive consumption externalities exist.
Moreover, we show that third-degree price discrimination enhances not only the
firm’s profit but also total consumer surplus.
September 2008
Tsuyoshi Toshimitsu (Kwansei
Gakuin University)
"On the Effects of Emission Standards as a Non-tariff Barrier to Trade in
the Case of a Foreign Bertrand Duopoly: A Note"
Resource and Energy Economics
<ttsutomu@kwansei.ac.jp>
Employing a model of an environmentally differentiated product market, we
analyze how an emission regulation as non-tariff barriers to trade affects
imports, the environment, and welfare in the case of a foreign Bertrand
duopoly. Related to this issue, we reconsider the result of Moraga-González and Padrón-Fumero (2002)
that a strict emission standard on a dirtier product degrades the environment
and reduces the net social surplus associated with the valuation of
environmental damage, if the marginal social valuation of environmental damage
is larger. On the other hand, we show that a strict emission standard on a
cleaner product always improves the environment and the net social surplus
associated with the valuation of environmental damage.
Kenji Fujiwara (Kwansei
Gakuin University), Norimichi
Matsueda (Kwansei Gakuin University)
“Dynamic voluntary provision of public goods: a generalization”
Journal of Public Economic Theory
<kenjifujiwara@kwansei.ac.jp>
This paper examines if the proposition offered by Fershtman
and Nitzan (1991) and Wirl
(1996) in the context of a dynamic voluntary provision model with a linear
production function can be generalized to a more general CES formulation. By
comparing the steady-state stocks of a public good in open-loop and feedback
Nash equilibria with that under the cooperative
solution, we demonstrate that their ranking among the steady-state stocks is
indeed preserved under the CES framework.
Kazumichi
Iwasa (Kobe University) and Toru Kikuchi
(Kobe University)
"Indirect Network Effects and the Impact of Trade Liberalization: A
Note"
Journal of International Trade and
Economic Development
<kazumichi@hi-net.zaq.ne.jp>
<kikuchi@econ.kobe-u.ac.jp>
In this note, we examine how trade
liberalization affects production structure in the presence of indirect network
effects (hardware/software systems). For these purposes we construct a simple
two-country model of trade with two incompatible hardware technologies. It is
shown that, given that both types of hardware exist before trade liberalization,
liberalization and increased intra-industry trade in software products may
reduce the variety of hardware technology via intensified network effects. It
is also shown that, contrary to the findings of previous studies on intra-industry
trade, some consumers may become worse off as the result of trade.
August 2008
Takumi Naito (University of California,
San Diego and Tokyo Institute of Technology) and Kenzo
Abe (Osaka University)
"Welfare- and revenue-enhancing tariff and tax reform under imperfect
competition"
Journal of Public Economic Theory
<tanaito@ucsd.edu>
We examine welfare and revenue effects of tariff and tax reform in a country
importing final and intermediate goods, both of which are produced under
imperfect competition. We consider two reform strategies. First, lower the sum
of a consumption tax and a tariff on the intermediate good, and leave the sum
of the consumption tax and a tariff on the final good unchanged. Second, lower
the former and change the latter to leave government revenue unchanged. We
specify conditions under which each reform strategy raises welfare without
decreasing government revenue.
Jota Ishikawa (Hitotsubashi
University) and Yoshimasa Komoriya
(Hitotsubashi University)
"Trade Costs, Wage Rates, Technologies, and Reverse Imports"
Canadian Journal of Economics
<jota@econ.hit-u.ac.jp>
We explore the effects of transport
costs, tariffs and foreign wage rates on domestic economy in the presence of
reverse imports, with special emphasis on inter-firm cost asymmetry in an
international oligopoly model. To serve the domestic market, a foreign firm
produces in the foreign country, while two domestic firms produce either at
home or abroad. Surprisingly, an increase in the foreign wage rate may raise
the profits of a firm producing in the foreign country. Even if all firms
produce in the foreign country, an increase in the foreign wage rate may
improve domestic welfare.
Kenji Fujiwara (Kwansei
Gakuin University) and Norimichi
Matsueda (Kwansei Gakuin University)
"Effects of Transboundary Pollution on the Mode
of Competition in an International Polluting Good Market"
Review of International Economics
<kenjifujiwara@kwansei.ac.jp>
By analyzing a strategic interaction between
environmentally-concerned governments, we examine how the competition mode of
international polluting oligopoly is determined. We show that a resulting form
of competition depends on the magnitudes of marginal damage costs and
cross-border spillover as well as on the degrees of similarities in these
environmental parameters.
Kenji Fujiwara (Kwansei Gakuin
University)
"Duopoly can be More Anti-Competitive than
Monopoly"
Economics Letters
<kenjifujiwara@kwansei.ac.jp>
We prove two results on feedback equilibria under
dynamic renewable resource duopoly. The linear feedback output is smallest,
which sharply contrasts to the existing literature where it is largest.
Moreover, prices in two feedback equilibria are
higher than under monopoly.
Tetsuya Saito (SUNY at Buffalo)
"An Expository Note on Alchian-Allen Theorem
When Sub-Utility Functions are Homogeneous of Degree n > 0 with Two Stage
Budgeting"
Economics Bulletin
<tsaito5@buffalo.edu>
This expository note shows a proof of Alchian and
Allen's conjecture broadly known as a phrase `shipping the good apples out'
meaning that consumers purchase fine quality relatively more than coarse one if
a fixed charge is imposed. Their statement is often referred as the Alchian-Allen theorem (or effect). The proof requires
conditions about homogeneity, inner solution and substitutability and they also
justify two-stage budgeting. In order this work to be an exposition, I
emphasize graphical representations, however, a comparison with the proof of Borcherding and Silberberg (JPE; 1978) is also considered.
This comparison clarifies difference between proofs using Hicksian
demand functions and using Marshallian demand
functions (with some specific conditions). Extending sequential budgeting
procedures, we also discuss perspectives toward multiple-quality analysis. That
turns out a definition based on sequential budgeting may open a way of
experimental study about the effect.
July 2008
Eiji
Horiuchi (Teikyo
University) and Jota Ishikawa (Hitotsubashi
University)
"Tariffs and Technology Transfer through an Intermediate Product"
Review of International Economics
<jota@econ.hit-u.ac.jp>
We examine the relationship between tariffs and
North-South technology transfer in an oligopoly model when technology is
embodied in a key component that only North firms can produce. They may have an
incentive to transfer their technologies to South firms even if the South's
licensing market is restricted and/or if IPR (intellectual property right)
protection is imperfect in the South. Interestingly, a decrease in the tariff on
the final good as well as an increase may induce technology transfer. Our
analysis suggests that the South should implement pro-competitive policies to
induce technology transfer and enhance welfare.
Yan Ma (Kobe University) and Fumio Dei (Kobe
University)
“Product Quality, Wage Inequality, and
Trade Liberalization”
Review of International Economics
<mayan003@kobe-u.ac.jp>
This
paper constructs what we call a quality differentiation model of Chinese trade.
This model captures some salient features of Chinese trade and allows us to
analyze the impact of trade liberalization on wage inequality. At present,
Chinese trade displays the following features: high-quality cars are imported
and low-quality cars are produced and consumed domestically, for which some
parts are imported. These features lead us to consider trade liberalization as
two types of tariff reductions: namely, a tariff reduction on final
quality-differentiated goods and a tariff reduction on intermediate goods. This
study shows that the two types of tariff reductions have completely different
effects on wage inequality. Moreover, the results show that welfare inequality
and wage inequality change in opposite directions when the tariff on final quality-differentiated
goods is reduced.
June 2008
Toru
Kikuchi (Kobe University) <kikuchi@econ.kobe-u.ac.jp> The
purpose of this study is to illustrate, with a simple two-country, two-good,
two-factor model, how a technological/regulational
improvement in one country's distribution sector can affect firms' location
decisions and the nature of the trading equilibrium. It is shown that,
through improvements in distribution sector, one country might divert
high-tech industries to another country. |
Junko Doi, Kazumichi Iwasa, Koji Shimomura
“Giffen behavior independent of the wealth level”
Economic Theory
<jkdoi@ipcku.kansai-u.ac.jp>
We demonstrate that a well-behaved utility function can generate Giffen behavior, where “well-behaved” means that its
indifference curves are smooth, convex, and closed in a commodity space; the
resulting demand function of each good is differentiable with respect to prices
and income. Moreover, we show that Giffen behavior is
compatible with any level of utility and an arbitrarily low share of income
spent on the inferior good. This contrasts sharply with the common view that
the Giffen paradox tends to occur when
households’ wealth levels are low.
Kozo Kiyota
(Yokohama National University and University of Michigan)
Toshiyuki Matsuura (Hitotsubashi University),
Shujiro Urata (Waseda University), and
Yuhong Wei (Hitotsubashi University)
"Reconsidering the Backward Vertical Linkages of Foreign Affiliates:
Evidence from Japanese Multinationals"
World Development
<surata@waseda.jp>
This paper examines the determinants of the backward vertical linkages of
Japanese foreign affiliates in manufacturing for the period 1994-2000, focusing
on the local backward linkages, or local procurement in the host country. Our
major findings are twofold. First, the unobserved affiliate-specific
characteristics explain the large part of the variation of the backward
linkages among foreign affiliates. Second, the experience of the affiliate has
positive and sometimes nonlinear effects on local procurement for the
affiliates, especially in Southeast Asia and China.
Jota Ishikawa and Yoshimasa
Komoriya (Hitotsubashi
University)
"Stay or Leave? Choice of Plant
Location with Cost Heterogeneity"
Japanese Economic Reivew
<jota@econ.hit-u.ac.jp>
In a two-country model, we examine
location choices by two domestic firms when they serve only domestic market and
their cost structures are different. Whether a firm, that has
more incentive for foreign direct investment (FDI), is more efficient or less
efficient than the other depends on the difference between domestic and foreign
marginal costs, trade costs, and the presence of fixed costs. Plant
locations may not be uniquely determined. In particular, a small change in
trade costs may reverse plant locations. Moreover, a decrease in transport
costs with FDI may deteriorate domestic welfare.
April 2008
Toru Kikuchi (Kobe University)
"Switching Costs and the Foreign Firm's Entry"
The Manchester School
<kikuchi@econ.kobe-u.ac.jp>
This paper considers a two-period model of market
entry with homogeneous products and switching costs. It is shown that the
pro-competitive effect of a foreign firm's entry (i.e., unilateral trade
liberalization) emerges before the entry. Also, conditions that are conducive
to a competitive environment in the second-period are shown to yield a less
competitive outcome in the first-period. That is, when the marginal cost of the
foreign entrant is relatively low, the first-period output of a domestic
monopolist is relatively low as well.
Kozo Kiyota
(Yokohama National University and University of Michigan)
and
Shujiro Urata (Waseda University)
"The role of multinational firms in international trade: The case of
Japan"
Japan and the World Economy
<surata@waseda.jp>
This paper examines the role of multinational firms in international trade
using firm-level panel data for Japanese firms between 1994 and 2000. Our
results indicate that multinational firms dominate Japanese trade. In 2000,
only 12.4 percent of Japanese firms were multinationals but they accounted for
93.6 and 81.2 percent of Japanese exports and imports, respectively. We found
that multinational firms emerged from being exporters/importers. These results
imply that firms do not make the choice of either exporting or undertaking FDI,
contrary to the findings of previous studies. Rather, exporters make a decision
on whether or not to undertake FDI.
March 2008
Toru Kikuchi (Kobe University)
"Time Zones as a Source of Comparative Advantage"
Review of International Economics
<kikuchi@econ.kobe-u.ac.jp>
This note proposes a three-country model of monopolistic competition that
captures the role of time zones in the division of labor. The connectivity of
business service sectors via communications networks (e.g., the Internet,
satellite communications systems) is found to determine the structure of
comparative advantage. That is, two countries with connected service sectors
have a comparative advantage in the good that requires business services. It is
also shown that the third unconnected country inevitably specializes in the
good that does not require business services.
Kenji Fujiwara (Kwansei
Gakuin University)
“Gains from Trade in a Differential Game
Model of Asymmetric Oligopoly”
Review of International Economics
<kenjifujiwara@kwansei.ac.jp>
This paper revisits a classical topic of trade gains in a differential game
model of oligopoly in which Home and Foreign firms differ in the number and
cost. After deriving the feedback Nash equilibrium, we provide examples to
consider how the difference in the number of firms or costs affects gainfulness
of trade. We prove that feedback strategies can result in implications for
trade gains which are sharply different from the open-loop case.
February 2008
Akihiko Yanase
(Takasaki City University of Economics) and Yasushi Kawabata
(Mie University)
"Strategic Import Policies in a Three Country Model with Vertically
Related Industries"
Economics Bulletin
<yanase@tcue.ac.jp>
This note examines strategic import policies in a
three-country model with vertical production and trade relationship. Reflecting
horizontal and vertical effects of the import policy, each country's optimal
policy can be either tariff or subsidy, depending on the relative numbers of
upstream and downstream firms.
Akihiko Yanase
(Takasaki City University of Economics)
"A Note on Pollution Intensity and the Effect of Tighter Environmental Policy
on Comparative Advantage"
Keio Economic Studies
<yanase@tcue.ac.jp>
This note reexamines the two-factor (capital and
labor), three-sector (two final goods sector and a pollution abatement sector)
model developed by Chua (2003, Oxford Economic Papers 55, 25–35). By redefining
pollution intensity, this note shows that an increase in the pollution tax rate
unambiguously raises the price of a pollution-intensive good as long as the
other (i.e., less pollution-intensive) good is least capital-intensive.
January 2008
Drusilla K. Brown (Tufts University)
Kozo Kiyota (Yokohama National University and
University of Michigan)
Robert M. Stern (University of Michigan)
"An Analysis of a US-Southern African Customs Union (SACU) Free Trade
Agreement"
World Development
<rmstern@umich.edu>
This paper analyzes the potential economic effects of bilateral negotiations
for an FTA between the United States and the Southern African Customs Union
(SACU). The US-SACU FTA bilateral negotiations were initiated in June 2003, but
have become deadlocked over a series of issues of concern to the SACU. To
determine whether a bilateral FTA might be in the SACU members' interests, we
use the Michigan Model of World Production and Trade to assess the welfare and
other economic effects of a bilateral FTA. We conclude that the benefits of an
FTA are rather small, and that the interests of the global trading community,
including the United States and SACU, could be better served by unilateral and
especially multilateral liberalization.