November 2010
Kenji Fujiwara (Kwansei Gakuin University)
“Market Integration and Competition in Environmental and Trade Policies”
Environmental and Resource Economics
<kenjifujiwara@kwansei.ac.jp>
Recent
empirics suggest the relevance of transport cost reductions for world trade
growth along with eliminations in protectionist trade barriers. To address the
welfare effects of trade cost reductions in a context of `trade and the
environment,' we develop a two-stage game model where governments choose
environmental and trade policies and firms play a Cournot-Nash
game. We show that reductions in transport costs lead to lower emission taxes
and higher tariffs. And, we find that the degree of pollution damage plays a
central role in whether market integration is welfare-improving relative to
autarky.
Kenji Fujiwara (Kwansei Gakuin University),
Tsuyoshi Shinozaki (Tohoku Gakuin University), and
Akihiko Yanase (Tohoku University)
“Dynamic Interactions in Trade Policy in a Differential Game Model of Tariff
Protection”
Review of Development
Economics
<kenjifujiwara@kwansei.ac.jp>
This
paper develops a two-country dynamic game model of tariff protection to
reconsider optimal trade policies and their implications for welfare. We show
that an import subsidy is optimal in the feedback Nash equilibria,
which results in a curious possibility that the domestic market is monopolized
by the foreign firm. However, welfare comparisons among Nash equilibria, free trade, and autarky reveal that feedback
Nash equilibria involve higher welfare than both
autarky and free trade, i.e., dynamic noncooperative
choices of policy serve as tacit policy coordination and ensure larger trade
gains relative to free trade.
Kenji Fujiwara (Kwansei Gakuin University)
“Environmental Policy and Trade Liberalization: The Case of Transboundary
Pollution from Consumption”
Natural Resource Modelling
<kenjifujiwara@kwansei.ac.jp>
This
paper develops a reciprocal market model of international duopoly with transboundary pollution from consumption to examine the
effects of bilateral tariff reductions on the equilibrium pollution tax and
welfare. We show that tariff reductions induce each country to raise an
emission tax and that trade liberalization is welfare-improving if the
parameter of pollution damages is sufficiently large. These results are in
contrast to the case of production-generated pollution and we seek the reason
for this contrast.
October 2010
Takumi Naito (Tokyo
Institute of Technology) and Ryoji Ohdoi (Osaka City University)
"A two-country
model of trade and growth with intersectoral
knowledge spillovers"
Journal of Economics
<tnaito@soc.titech.ac.jp>
We
formulate a two-country, two-good, two-factor endogenous growth model with
learning by doing and intersectoral knowledge
spillovers. Our model exhibits no transitional dynamics because of constant returns
to capital, the existence of only one state variable for each country, and the
factor price equalization theorem. By applying our model to the problem of aid
and growth, we show that a permanent increase in untied aid raises the common
growth rate if and only if the propensity to consume the capital-intensive good
in the recipient country is larger than in the donor country.
Yuji Matsuoka (Kobe
University) and Marcelo Fukushima (Kobe College)
"Time Zones, shift working and international outsourcing"
International Review of
Economics & Finance, Vol. 19, Issue 4, October 2010, Pages 769-778
<081e108e@stu.kobe-u.ac.jp
(Matsuoka) ><fukushima@mail.kobe-a.ac.jp (Fukushima) >
We
build a trade model with two identical countries located in different time zones
and one sector with intermediate differentiated goods produced in two
successive stages. We introduce shift working disutility that raises night wage
and firms that “virtually” outsource foreign labor. We found that firms only
outsource if outsourcing costs are relatively low and shift disutility is high.
When outsourcing occurs, it generates the highest level of welfare among
production modes. Intermediate values of shift working disutility generate the
lowest level of welfare. Outsourcing and domestic labor are substitutes at the
firm level and complements at the economy level.
September 2010
Yuichi Furukawa (Chukyo University)
"Intellectual Property Protection and Innovation: An Inverted-U
Relationship"
Economics Letters
<you.furukawa@gmail.com>
This paper shows in an
endogenous growth model without scale effects that the relationship between
intellectual property protection and innovation can be inverted U-shaped. The
inverted-U relationship emerges from an interaction between learning-driven and
R&D-driven technological advances.
Kozo Kiyota
(Yokohama National University)
“Are US Exports
Different from China's Exports? Evidence from Japan's Imports”
The World Economy
<kiyota@ynu.ac.jp>
Are
US exports different from China’s exports? If so, how?
This article attempts to answer this question, using product-level
manufacturing import data from Japan. To make the comparison clear, this
article also examines exports from the EU. The results indicate that more than
85 per cent and 83 per cent of products exported by the USA and the EU,
respectively, to Japan are also commonly exported from China. Both the US and
the EU export products are priced higher than China’s export products,
regardless of industries. This result suggests that quality differences matter
in explaining the high overlap of China’s export products with US and EU export
products. In some industries, however, the price differences of US and EU
exports relative to China’s exports are relatively small. This result implies
that either Chinese firms are upgrading the quality of
their products, or US and EU firms are improving their efficiencies such that
they can compete with Chinese firms.
Fumio Dei (Kobe
University)
“Quality of Labour Markets in a Developing
Country”
Review of International Economics
<dei@kobe-u.ac.jp>
This study is an application of Yano’s
market quality economics to trade. I consider the quality of labour markets in a developing country and shed light on an
important role of the voting mechanism in the process in which the quality of labour markets is endogenously determined. Assuming the
majority vote, I demonstrate that if the timing of voting is wrong, a
developing country misses high-quality labour markets
although trade provides an opportunity for it to reach high-quality labour markets.
July 2010
Kenji Fujiwara (McGill
University and Kwansei Gakuin
University)
“When are voluntary export restraints voluntary? a
differential game approach”
Australian Economic
Papers
<kenjifujiwara@kwansei.ac.jp>
We
revisit voluntariness of voluntary export restraints
(VERs) in a differential game model of duopoly with
sticky prices. We show that a VER set at the free trade level has no effect on
equilibrium under open-loop strategies while the same policy results in a
smaller profit for the exporting firm, i.e. it is involuntary under a
non-linear feedback strategy. Moreover, we prove an extended proposition of Dockner and Haug (1991) on voluntariness of VERs under a
linear feedback strategy.
Kenji Fujiwara (McGill University and Kwansei Gakuin University)
“Market integration, environmental policy, and transboundary
pollution from consumption”
Journal of International Trade and
Economic Development
<kenjifujiwara@kwansei.ac.jp>
Recent empirics report that transport cost declines significantly
contribute to rapidly growing world trade. This paper develops a reciprocal
market model of intra-industry trade with transboundary
pollution from consumption to consider how market integration in the form of
transport cost reductions affects the noncooperative
choice of an environmental policy and the equilibrium welfare. We show that
market integration can improve welfare locally, but that welfare under any
non-prohibitive trade cost can not be higher than welfare under autarky. This
impossibility of trade gains exhibits a sharp contrast to the case of
production-generated pollution.
Jota Ishikawa (Hitotsubashi University) and Toshihiro Okubo (Kobe
University)
"Environmental Product Standards in North-South Trade"
Review of Development
Economics
<jota@econ.hit-u.ac.jp>
Consumption
is one channel through which the environment is damaged. To protect the
environment, various product standards have been introduced across the world.
This paper uses a new economic geography framework to explore the effects of
environmental product standards on environment in a North-South trade model. We
examine the situation in which North unilaterally introduces an environmental
product standard. Specifically, those products that do not meet the standard
are not allowed to be sold in North’s market. We find that such a standard may
worsen North’s environment but improve South’s environment due to firm
relocation.
Jota Ishikawa (Hitotsubashi University), Yoichi
Sugita (Stockholm School of Economics), and Laixun
Zhao (Kobe University)
"Commercial Policy and Foreign Ownership"
Review
of International Economics
<jota@econ.hit-u.ac.jp>
Foreign
multinationals often not only export but also control local firms through FDI.
This paper examines the various effects of trade and industrial policies when
exports and FDI coexist. We focus on the case in which a foreign firm has full
control of a local firm through partial ownership. Cross-border ownership on
the basis of both financial interests and corporate control leads to horizontal
market-linkages through which tariffs and production subsidies may harm
locally-owned firms but benefit the foreign firm. Foreign ownership regulation
benefits locally-owned firms. These results could have strong policy
implications for developing countries that attract an increasing share of world
FDI.
June 2010
Toru Kikuchi (Kobe
University) and Koichi Hamada (Yale University)
“Time Preference and
Trade Imbalance”
Review of International
Economics
<kikuchi@econ.kobe-u.ac.jp>
<koichi.hamada@yale.edu >
This paper presents a unified theory of
trade and investment in the world where the rate of time preference varies
between countries. In the framework proposed by Buiter
(1981), we can analyze the situation where two countries have different rates
of discount. Here, the value of the debt to income does not converge to zero
but remains constant even in the long run. Furthermore, we show that the
existence of less capital-intensive nontradables
works to promote capital movements: since a more patient country incompletely
specializes in less-capital intensive nontradables,
capital must flow out of that country.
Toru Kikuchi (Kobe
University) and Sugata Marjit
(Centre for Studies in Social Science)
“Growth
with Time Zone Differences”
Economic
Modelling
<kikuchi@econ.kobe-u.ac.jp> <smarjit@hotmail.com>
We propose a two-country growth model
of intermediate business services trade that captures the role of time zone
differences. It is shown that a time-saving improvement in intermediate
business services trade involving production in different time zones can have a
permanent impact on productivity.
Toru Kikuchi
(Kobe University) and Kazumichi Iwasa
(Kyoto University)
“Competing
Industrial Standards and the Impact of Trade Liberalization”
International
Economic Journal
<kikuchi@econ.kobe-u.ac.jp>
<iwasa@kier.kyoto-u.ac.jp>
The main purpose of this study is to
illustrate, with simple trade theory, the relationship between competing
industrial standards and trade liberalization. We assume that there are two
competing industrial standards in an international context, each of which
applies to a group of differentiated products. A product can be used only in
combination with other products based on the same industrial standard. We
examine the impact of trade liberalization (i.e., a decline in trade costs) on
consumers’ choice of a standard. It will be shown that the degree of indirect
network effects, captured with substitution between differentiated products,
plays an important role as a determinant of the impact of trade liberalization.
Toru Kikuchi
(Kobe University) and Kazumichi Iwasa
(Kyoto University)
“Interregional
Trade, Industrial Location and Import Infrastructure”
International
Economics and Economic Policy
<kikuchi@econ.kobe-u.ac.jp> <iwasa@kier.kyoto-u.ac.jp>
The purpose of this study
is to illustrate, with a simple two-region, two-good, two-factor model, how an
improvement in one region’s import infrastructure can affect firms’ location
decisions and the nature of the trading equilibrium. It is shown that, through
improvements in import infrastructure, one region might divert high-tech
industries to another region. This effect reduces the incentive to improve
import infrastructure.
Toru Kikuchi
(Kobe University)
“A Simple Model
of Foreign Brand Penetration under Monopolistic Competition”
Journal of
Economics
<kikuchi@econ.kobe-u.ac.jp>
The main purpose of this study is to
illustrate, with a simple monopolistic competition trade model, how trade
liberalization (i.e., a decline in trade costs) can affect domestic
entrepreneurs’ decision between providing domestic or foreign brands, and thus
the degree of foreign brand penetration. It is shown that, as trade costs
decrease, more entrepreneurs choose to provide foreign brands. Furthermore, it
is shown that the shift to foreign brands magnifies the negative impact of
trade liberalization on the profits of firms selling domestic brands.
Yoshinori Kurokawa (University of Tsukuba)
"Variety-skill complementarity: a simple
resolution of the trade-wage inequality anomaly"
Economic Theory
<kurokawa@dpipe.tsukuba.ac.jp>
The
Stolper-Samuelson theorem predicts that the relative
wage of high-skilled to low-skilled labor will increase in the high-skill
abundant US but decrease in low-skill abundant Mexico after trade
liberalization, while it actually began to rise in both countries in the late
1980s. We present a simple resolution of this "trade-wage inequality
anomaly" in a model of variety trade. Variety trade increases the variety
of intermediate goods used by the final good. If the varieties and high-skilled
labor are complements, the skill premium rises in both countries. This linking
of imports of new foreign varieties--the extensive margin--to wage inequality
is compatible with evidence. Our numerical examples illustrate that small
amounts of variety trade can produce a significant increase in relative wage.
Yoshinori Kurokawa (University of Tsukuba)
"Fixed cost, number of firms, and skill premium: An alternative source for
rising wage inequality"
Economics Letters
<kurokawa@dpipe.tsukuba.ac.jp>
The
number of firms and the wage inequality increased in U.S. manufacturing
industries after the Carter/Reagan deregulation was implemented. By extending a
variety model, this paper provides a possible theoretical explanation for this
observation on the basis of fixed cost.
April 2010
Jota Ishikawa (Hitotsubashi University), Hodaka
Morita (University of New South Wales), and Hiroshi Mukunoki
(Gakushuin University)
"FDI in Post-Production Services and Product Market Competition"
Journal of International
Economics
http://www.econ.hit-u.ac.jp/~
Post-production
services, such as sales, distribution, and maintenance, comprise a crucial
element of business activity. We explore an international duopoly model in
which a foreign firm has the option of outsourcing post-production services to
its domestic rival or providing those services by establishing its own
facilities through FDI. We demonstrate that trade liberalization in goods may
hurt domestic consumers and lower world welfare, and that the negative welfare
impacts are turned into positive ones if service FDI is also liberalized. This
finding yields important policy implications, given the reality that the
progress of liberalization in service sectors is still limited.
Seiya Fujisaki (Osaka University) and Kazuo Mino (Kyoto University)
"Long-Run Impacts of Inflation Tax with Endogenous Capital
Depreciation"
Economics Bulletin
<fujisaki@shinshu-u.ac.jp >
This paper examines the
long-run impact of inflation tax in the context of a generalized Ak growth model in which the rate of capital depreciation
is endogenously determined. We assume that the rate of capital depreciation
positively depends on capital utilization rate and negatively depends on
maintenance expenditures. Money is introduced via a cash-in-advance constraint
that may apply to the maintenance expenditures as well as to consumption and
investment spendings. We find that the long-run
effects of inflation tax are more complex than those obtained in the monetary Ak growth model with a fixed
capital depreciation rate. In particular, the relation between inflation and
growth is highly sensitive to the specification of the capital depreciation
technology as well as to the forms of cash-in-advance constraints.
Tadashi Morita (Osaka
University)
"Dynamic Analysis of Outsourcing"
Journal of Economics
<gge013mt@mail2.econ.osaka-u.
Hiroshi Kurata (Tohoku
Gakuin University), Takao Ohkawa
(Ritsumeikan University), and Makoto Okamura
(Hiroshima University)
"Market Size and Firm Location in a Service
Industry"
Review of International
Economics
<hkurata@tscc.tohoku-gakuin.ac.jp>
This paper investigates the
welfare effects of firm location in a service industry. We consider the
situation where firms determine their locations in either of two regions with a
difference in market size. From the viewpoint of the consumers’ welfare, there
are too few firms in the large market and too many in the small market.
However, from the viewpoint of the producers’ and social welfare, the opposite
is true. Further, an increase in the difference in market size is unambiguously
unfavorable for the producers. On the other hand, such an increase is favorable
for the consumers and the economy as a whole.
March 2010
Yasushi Kawabata (
“Vertical Trade and Free Trade Agreements”
Journal of the Japanese and International
Economies
<kawabata@edu.mie-u.ac.jp>
We investigate the effects of free trade
agreements (FTAs) on tariffs and welfare in vertical
trade. We consider a three-country model where an FTA is formed between a
country exporting a final good and a country exporting an intermediate good. The FTA unambiguously leads to a reduction in the
member country’s tariff, but may cause the non-member country’s tariff level to
increase. In the case where FTA raises the non-member country’s tariff level,
the FTA increases that country’s welfare. In contrast, the FTA may render its
member countries better off. This result implies that the formation of an FTA
may not always be Pareto-improving.
Yasushi Kawabata (
“Strategic Export Policy in Vertically Related Markets”
Bulletin of Economic Research
<kawabata@edu.mie-u.ac.jp>
This paper analyses how strategic export policies
are affected by introducing an imperfectly competitive intermediate good into a
Bertrand duopoly model with product differentiation, where a home and a foreign
final-good firm export to a third-country market. It is shown that when the
home and foreign markets for the intermediate good are segmented, the optimal
export policy towards the final good is a tax. In contrast, under integrated
markets, the optimal export intervention is a subsidy. Whether bilateral export
intervention is welfare improving compared with free trade,
depends on the degree of product differentiation between the home and foreign
final goods.
Dao-Zhi Zeng
(Tohoku University) and Laixun Zhao (Kobe
University)
"Globalization, Interegional
and International Inequalities"
Journal of Urban Economics
<zhao@rieb.kobe-u.ac.jp>
This paper examines the impact of globalization on
interregional and international inequalities in a setup of two countries and
four regions, under international mobility of capital. In contrast to the
literature, countries and regions are not required to be symmetric. We find
that the aforementioned inequalities are closely related to the country size,
region size, the degree of globalization (e.g., capital mobility and trade
costs) and the level of local infrastructure. In particular, international
trade behaves as a dispersion force when capital is internationally mobile for
small countries such that reducing domestic transport costs lowers its
interregional inequality, but the opposite can be true for large countries or
when capital is internationally immobile.
Arijit Mukherjee (University of
Nottingham) and Laixun Zhao (Kobe University)
"Profit Raising Entry"
Journal of Industrial Economics
<zhao@rieb.kobe-u.ac.jp>
Common wisdom suggests that entry reduces
profits of incumbent firms. On the contrary, we demonstrate that if the
incumbents differ in marginal costs and the entrants behave like Stackelberg followers, then entry may benefit the cost
efficient incumbents while hurting the cost inefficient ones. And the total
outputs of all incumbents may be higher under entry.
Morihiro Yomogida
(Sophia University) and Laixun Zhao (Kobe University)
"Offshore Outsourcing, International Migration, and Wage
Inequality"
Southern Economic Journal
<zhao@rieb.kobe-u.ac.jp>
This paper develops a general equilibrium
model with a vertical production structure to examine the relationship between
offshore outsourcing and international migration, especially emphasizing their
effects on the wages of skilled and unskilled workers. Outsourcing in
skilled-labor intensive services arises due to product differentiation and
scale economies, and outsourcing in unskilled-labor intensive processing occurs
because of factor endowment differences. This tractable model allows us to rank
outsourcing and migration, according to the wages of both types of workers. We
also examine whether offshore outsourcing and international migration are
complements or substitutes.
Makoto Okamura (Hiroshima University) and Laixun
Zhao (Kobe University)
"Competing to Outsource in the South"
Review of International Economics
<zhao@rieb.kobe-u.ac.jp>
This paper analyzes foreign-direct-investment
(FDI) competition in a three-country framework: two Northern countries and one
Southern country. We have in mind the competition of Airbus and Boeing in a
developing country. The host-country government endogeneizes
tariffs, while Airbus and Boeing choose domestic output and FDI. Wages and
employment in the home countries are negotiated. We find that in the unique
equilibrium, both Airbus and Boeing compete to undertake FDI in the developing
country. This arises because the host country can play off the multinationals,
which in turn stems from three factors: (a) Oligopolistic
rivalry; (b) Quid prod quo FDI; (c) Strategic outsourcing—FDI drives down the
union wages at home if the host-country wage is sufficiently low. However, if
the host-country wage is sufficiently high, the union wage increases under FDI.
In such cases, FDI competition benefits the multinationals, the labor unions,
as well as the host country.
February 2010
Kenji Fujiwara (McGill
University and Kwansei Gakuin
University) and Tsuyoshi Shinozaki (Tohoku Gakuin
University)
“The Closed-Loop Effects of Market Integration in a Dynamic Duopoly”
Australian Economic
Papers
<kenjifujwara@kwansei.ac.jp>
This
paper develops a dynamic game model of reciprocal dumping to reconsider welfare
effects of market integration, i.e., reductions in transport costs. We show
that welfare under trade is unambiguously less than welfare under autarky for
any level of transport costs, which is impossible in static models where trade
is gainful if the transport cost is low enough. This is because the negative
effect through closed-loop property of feedback strategies dominates the
positive effects.
Elias Dinopoulos
(University of Florida), Kenji Fujiwara (McGill University and Kwansei Gakuin University), and
Koji Shimomura (Kobe University)
“International Trade under Quasi-Linear Preferences”
Review of Development Economics
<elias.dinopoulos@cba.ufl.edu> (Dinopoulos),
<kenjifujiwara@kwansei.ac.jp> (Fujiwara)
We analyze formally the pattern and volume of trade by embedding
quasi-linear preferences in the standard perfectly-competitive, two-factor,
two-sector, and two-country trade model. Quasi-linear preferences classify the
two products into a luxury (income sensitive) and a necessity (income
insensitive) one and preserve the traditional Heckscher-Ohlin
and Heckscher-Ohlin-Vanek theorems: a country exports
the good that uses intensively its abundant factor of production and exports
factor services associated with its abundant factor of production. The
predicted factor content of trade under quasi-linear preferences is smaller
(larger) than the predicted factor content of trade under homothetic
preferences if and only if the luxury good is capital (labor) intensive. This
result offers a novel explanation for the “missing-trade” mystery.
January 2010
Kozo Kiyota
(Yokohama National University) and Tetsuji Okazaki
(University of Tokyo)
"Industrial Policy
Cuts
Journal of Law and
Economics
<kiyota@ynu.ac.jp>
<okazaki@e.u-tokyo.ac.jp>
A
number of studies have revealed that the effect of industrial policy on
productivity growth is negative. Is this because industrial policy fails to
control the activities of firms, or because it can effectively control them?
This paper attempts to answer these questions, using firm-level data from the cotton
spinning industry in Japan for the period 1956-64. It has been determined that
industrial policy cut two ways during this period. Industrial policy
effectively controlled the output of cotton spinning firms, which contributed
to the establishment of a stable market structure during the period. On the
flip side, such policy constrained the reallocation of resources from less
productive large firms to more productive small firms. Combined with the
negative productivity growth of large firms during this period, industrial
policy resulted in negative industry productivity growth.