2013

Hiroshi Daisaka and Taiji Furusawa Review of International Economics

Takashi Kamihigashi Economic Theory Bulletin

Takashi Kamihigashi and John Stachurski Fixed Point Theory and Applications

Takashi Kamihigashi Economic Theory

Naoto Jinji and Tsuyoshi Toshimitsu Japan and the World Economy

Naoto Jinji and Tsuyoshi Toshimitsu Review of Development Economics

Naoto Jinji Review of International Economics

Tsuyoshi Toshimitsu Journal of Industry, Competition and Trade

Seiya Fujisaki Economic Modelling

Eric W. Bond and Yan Ma Pacific Economic Review

Morihiro Yomogida and Nori Tarui Pacific Economic Review

Been-Lon Chen, Yu-Shan Hsu, and Kazuo Mino Macroeconomic Dynamics

Keisaku Higashida and Shunsuke Managi Environment and Development Economics

Daisuke Ichinose, Keisaku Higashida, Takayoshi Shinkuma, and Michikazu Kojima Environment and Development Economics

Tsuyoshi Toshimitsu International Economic Journal

Yiyong Cai, Takashi Kamihigashi, and John Stachurski Journal of Mathematical Economics

Tsuyoshi Toshimitsu The World Economy

Yuichi Furukawa Economics Letters

Yin-Wong Cheung and Eiji Fujii International Journal of Finance and Economics

Tetsuro Mizoguchi and Nguyen Van Quyen Journal of Public Economic Theory

Kazuhiro Takauchi Journal of Industry, Competition and Trade

Yushi Yoshida North American Journal of Economics and Finance

Asuka Oura and Tadashi Morita Economic Modelling

Takashi Kamihigashi and John Stachurski Theoretical Economics

Been-Lon Chen, Yu-Shan Hsu and Kazuo Mino Journal of Economics

Taketo Kawagishi and Kazuo Mino Economics Bulletin

Yunfang Hu and Kazuo Mino Journal of International Economics

 

December 2013

 

Hiroshi Daisaka (Hitotsubashi University) and Taiji Furusawa (Hitotsubashi University)

gDynamic Free Trade Networks: Some Numerical Resultsh

Review of International Economics

The paper is the first to comprehensively simulate FTA evolution in various environments. The analysis unveils that FTA networks often evolve to a partition of the world into a small number of groups of asymmetric size due to the negative externality caused by preference erosion.

 

November 2013

 

Takashi Kamihigashi (Kobe University)
gAn Order-Theoretic Approach to Dynamic Programming:  An Expositionh
Economic Theory Bulletin
In this note, we discuss an order-theoretic approach to dynamic programming.  In particular, we explain how order-theoretic fixed point theorems can be used to establish the existence of a fixed point of the Bellman operator, as well as why they are not sufficient to characterize the value function.  By doing this, we present the logic behind the simple yet useful result recently obtained by Kamihigashi (2013) based on this order-theoretic approach.

 

Takashi Kamihigashi (Kobe University) and John Stachurski (Australian National University)

gSimple Fixed Point Results for Order-Preserving Self-Maps and Applications to Nonlinear Markov Operatorsh
Fixed Point Theory and Applications
Consider a preordered metric space (X, d, <=).  Suppose that d(x,y) <= d(x',y') if x' <= x <= y <= y'$.  We say that a self-map T on X is asymptotically contractive if d(T^i x, T^i y) -> 0 as i -> infinity for all x, y in X.  We show that an order-preserving self-map T on X has a globally stable fixed point if and only if T is asymptotically contractive and there exist x, x* in X such that T^i x <= x* for any natural number i and x* <= T x*.  We establish this and other fixed point results for more general spaces where d consists of a collection of distance measures.  We apply our results to order-preserving nonlinear Markov operators on the space of probability distribution functions on R.

 

Takashi Kamihigashi (Kobe University)
gElementary Results on Solutions to the Bellman Equation of Dynamic Programming:  Existence, Uniqueness, and Convergenceh
Economic Theory
We establish some elementary results on solutions to the Bellman equation without introducing any topological assumption. Under a small number of conditions, we show that the Bellman equation has a unique solution in a certain set, that this solution is the value function, and that the value function can be computed by value iteration with an appropriate initial condition. In addition, we show that the value function can be computed by the same procedure under alternative conditions. We apply our results to two optimal growth models: one with a discontinuous production function and the other with ``roughly increasing" returns.

 

Naoto Jinji (Kyoto University) and Tsuyoshi Toshimitsu (Kwansei Gakuin University)
gStrategic R&D Policy in a Quality-Differentiated Industry with Three Exporting Countriesh
Japan and the World Economy
We examine strategic research and development (R&D) policy for quality-differentiated products in a third-market trade model. We extend the previous work by adding a third exporting country, so that the market structure is international triopoly. We show that the presence of the third exporting country affects strategic R&D policies. With three exporting countries, the lowest-quality exporting country gains from taxing domestic R&D and the middle-quality exporting country gains from subsidizing domestic R&D under both Bertrand and Cournot competition. As in the duopoly case, however, the optimal unilateral policy for the highest-quality exporting country depends on the mode of competition. Various cases of policy coordination by exporting countries are also examined.

Naoto Jinji (Kyoto University) and Tsuyoshi Toshimitsu (Kwansei Gakuin University)
gStrategic Investment Subsidies under Asymmetric Oligopolyh
Review of Development Economics
This paper examines strategic investment subsidies in an international oligopoly. We construct a general oligopoly model in which firms compete in two stages and governments commit to investment subsidies prior to firms' actions. We consider asymmetry among firms that arises from the nature of goods they produce rather than their cost structures. When firms produce asymmetrically differentiated goods, we find that a change in the number of foreign competitors may alter the sign of the optimal unilateral investment subsidy. An example of policy reversal is provided in the case of strategic research and development subsidies for a quality-differentiated industry.

Naoto Jinji (Kyoto University)
gIs Corporate Environmentalism Good for Domestic Welfare?h
Review of International Economics
Many private firms voluntarily care about the environment and declare that their products and production processes are environmentally friendly. This paper shows that corporate environmentalism may reduce the effectiveness of government policies. A simple third-market trade model with strategic environmental and trade policy is employed, in which an environmentally conscious domestic firm competes with a profit-maximizing foreign firm. It is shown that even if emission taxes and export subsidies are both available, corporate environmentalism may reduce domestic welfare when pollution is transboundary. In the realistic situation where export subsidies are prohibited, welfare may fall even if pollution is local.

 

October 2013

 

Tsuyoshi Toshimitsu (Kwansei Gakuin University)
gCompatibility under Differentiated Duopoly with Network Externalities: A Commenth
Journal of Industry, Competition and Trade
Chen and Chen (2011) analyze the effects of compatibility under system product Cournot competition with network externalities. They show that a firmfs optimal strategy is to set an incompatible system standard, even though perfect compatibility is socially optimal. In this case, a social dilemma arises. However, their result depends on a specific assumption about the network size. We use the framework of Shy (1995) to modify this assumption, and hence show that the social dilemma identified by Chen and Chen (2011) does not arise.

 

Seiya Fujisaki (Shinshu University)

gTaylor rules and equilibrium determinacy in a two-country model with non-traded goodsh

Economic Modelling 35, pp.597-603

We analyze a relation between interest rate controls and equilibrium determinacy using a two-country model featuring traded and non-traded goods. In addition, parameters of preference and production may differ between the two countries. We find that macroeconomic stability strongly depends on such heterogeneity including monetary policy, and that it is easier to generate determinate equilibrium under perfect liberalization of the economy, but to operate monetary policy in the economy with non-traded goods.

 

Eric W. Bond (Vanderbilt University) and Yan Ma (Kobe University)

gLearning by Doing and Fragmentationh

Pacific Economic Review

We analyze the competitive equilibrium and socially optimal allocation of production fragments in a two country model where there is learning by doing with spillovers between fragments in the home country. We distinguish between forward and backward knowledge linkages, where learning results from producing products that are less (more) complex than the current knowledge frontier with forward (backward) linkages. We compare the pattern of comparative advantage in the competitive and socially optimal cases, and compare the intensive and extensive margins of fragments produced at home in the two cases. We establish a sufficient condition for the range of fragments produced at home to be non-decreasing with forward linkages. We also show that with backward linkages, the home country will produce some fragments in the neighborhood of the steady state that are more complex than those produced in the steady state.

 

Morihiro Yomogida (Sophia University) and Nori Tarui (University of Hawaii)

gEmission Taxes and Border Tax Adjustments for Oligopolistic Industriesh

Pacific Economic Review

We examine the welfare consequence of emission tax with and without a Border Tax Adjustment for an imperfectly competitive industry, where intra-industry trade arises between countries. BTA allows a government to impose a pollution-content tariff on imports and refund an emission tax for export sales. We analyze the structure of an optimal emission tax with BTA when a government chooses its emission tax rate to maximize its national welfare. We show that the optimal emission tax policy with BTA achieves greater national welfare and higher environmental quality than the optimal policy without BTA.

 

September 2013

 

Been-Lon Chen, Yu-Shan Hsu, and Kazuo Mino

gWelfare Implications and Equilibrium Indeterminacy in a Two-sector Growth Model with Consumption Externalitiesh
Macroeconomic Dynamics
One-sector neoclassical growth models reveal that consumption externalities lead to inefficient allocation in a steady state and indeterminate equilibrium toward the steady state only if there is a labor-leisure tradeoff. This paper shows that in a two-sector neoclassical growth model, even without a labor-leisure tradeoff, consumption spillovers easily lead to inefficient allocation in a steady state and indeterminate equilibrium toward the steady state. Consumption spillovers that yield over-accumulation of capital in an otherwise identical one-sector model may lead to under-accumulation of capital in two-sector models depending on relative capital intensities and relative degrees of externalities. Moreover, a two-sector model economy with consumption externalities is less stabilized than an otherwise identical one-sector model economy with consumption externalities.

 

August 2013

 

Keisaku Higashida (Kwansei Gakuin University) and Shunsuke Managi (Tohoku University)

gDeterminants of Trade in Recyclable Wastes: Evidence from Commodity-Based Trade of Waste and Scraph

Environment and Development Economics

This paper examines factors that affect the trade of recyclable waste in both exporting and importing countries. To this end, we employ two important elements: first, we adopt a gravity model in our empirical methodology; second, we select five waste and scrap commodities and undertake estimations using commodity-level trade data. We demonstrate that, the higher the wage/per capita GDP/population of an importing country, the more recyclable wastes it imports. This result suggests that the demand for final goods, and accordingly, the demand for materials including recycled material, have strong effects on the import volume of recyclable waste. Moreover, this implies that the imports of a developing country from developed countries increase with expanding industrial activity and economic growth. We find no evidence for a pollution haven for wastes and recycling.

 

Daisuke Ichinose (Rikkyo University), Keisaku Higashida (Kwansei Gakuin University), Takayoshi Shinkuma (Kansai University), and Michikazu Kojima (Institute of Developing Economies)

gShould the trade of hazardous waste be uniformly regulated? An empirical analysis of export demand for ewaste and scrapfh

Environment and Development Economics

We examine the substitutability of waste and scrap exported from different countries by estimating the export demand functions of China. In particular, we focus on the export of other ferrous waste and scrap (HS code 720449) and other waste, parings and scrap of plastics (HS code 391590). It is shown that the substitutability of these wastes and scraps is weak among the exporting countries. Our empirical results imply that a uniform ban on trading hazardous waste, represented by the Basel Ban, could be an inefficient environmental policy.

 

Tsuyoshi Toshimitsu (Kwansei Gakuin University)
gStrategic product R&D investment policy under international rivalry in the presence of demand spillover effectsh
International Economic Journal
We develop a model of product (i.e., quality-improving) research and development (R&D) investment competition in a horizontally differentiated duopoly. In particular, based on a third-country market model, we consider the optimal product R&D investment policy under international rivalry in the presence of demand spillover effects associated with improving the quality level of a product. We show how the optimality of a noncooperative and a cooperative R&D investment policy depends on the strength of demand spillover effects. Furthermore, we consider the same issues in the case of heterogeneous consumers and alternative utility functions.

 

Yiyong Cai (Commonwealth Scientific and Industrial Research Organisation & Australian National University), Takashi Kamihigashi (Kobe University), and John Stachurski (Australian National University)

gStochastic Optimal Growth with Risky Labor Supplyh
Journal of Mathematical Economics
Production takes time, and labor supply and profit maximization decisions that relate to current production are typically made before all shocks affecting that production have been realized.  In this paper we re-examine the problem of stochastic optimal growth with aggregate risk where the timing of the model conforms to this information structure.  We provide a set of conditions under which the economy has a unique, nontrivial and stable stationary distribution.  In addition, we verify key optimality properties in the presence of unbounded shocks and rewards, and provide the sample path laws necessary for consistent estimation and simulation.

July 2013

 

Tsuyoshi Toshimitsu (Kwansei Gakuin University)
gThe Role of GATT/WTO as a Commitment Device in the Presence of a Time Lag: Free Trade, Time-Consistent Tariff Policy, and Market Sizeh
The World Economy
We consider whether a free trade policy is superior to tariff policies in the presence of a time lag between production and trade decisions. We show that the preferable choice between a free trade policy and a time-consistent tariff policy depends on the market size of the importing country. However, because a free trade policy itself is not necessarily credible in the presence of a time lag, the importing country requires an international organization such as GATT/WTO as a commitment device. Accordingly, employing a noncooperative game approach, we analyze under what conditions becoming a member of such an international organization is a subgame perfect Nash equilibrium and show that free trade under the GATT/WTO regime is Pareto improving for the importing and exporting countries.

 

Yuichi Furukawa (Chukyo University)
gThe Struggle to Survive in the R&D Sector: Implications for Innovation and Growthh
Economics Letters
By allowing for investment activities by research and development (R&D) firms to prevent product obsolescence, we show that if legal patent protection is too strong, a higher R&D subsidy rate delivers insufficient investments for survival in the R&D sector, depressing innovation and growth in the long run.

 

Yin-Wong Cheung (City University of Hong Kong) and Eiji Fujii (Kwansei Gakuin University)
gExchange Rate Misalignment Estimates - Sources of Differencesh

International Journal of Finance and Economics

We study the differences in currency misalignment estimates obtained from datasets derived from two different International Comparison Program (ICP) surveys. A decomposition exercise reveals that year 2005 misalignment estimates are substantially affected by the ICP price revision. Further, we find that differences in misalignment estimates are systematically affected by a countryfs participation status in the ICP survey and its data quality - a finding that casts doubt on the economic and policy relevance of these misalignment estimates. The findings are robust to the use of alternative datasets and specifications. The patterns of changes in estimated degrees of misalignment across individual countries, as exemplified by the BRIC economies, are highly variable.

 

March 2013

 

Tetsuro Mizoguchi (Reitaku University) and Nguyen Van Quyen (University of Ottawa)

gAMAKUDARI: THE POST-RETIREMENT EMPLOYMENT OF ELITE BUREAUCRATS IN JAPANh

Journal of Public Economic Theory 14 (5), 2012, pp. 813–847.

This paper analyzes the amakudari practice in Japan. Amakudari refers to a process in which government agencies contact the private firms that they regulate, asking them to provide employment for their retiring elite bureaucrats. Upon employment at the private firms, bureaucrats may collude with their former colleagues in the ministries they worked for to secure lucrative government contracts, avoid regulatory inspections, or obtain preferential treatment for their new employers. This paper provides an explicit formalization of the implicit collusion between the regulator and the regulated.

 

Kazuhiro Takauchi (Onomichi City University)
gRules of Origin and Strategic Choice of Complianceh
Journal of Industry, Competition and Trade
This paper examines how an input supplier's monopoly power affects exporters' choice between compliance and noncompliance with rules of origin (ROO) in a free trade area (FTA). When the regional input supplier has monopoly power, the number of compliers largely affects the input price. This is because to meet ROO, exporters must use a certain ratio of the input originated within the area. In such a case, each exporter has an incentive to choose noncompliance with ROO if the rival exporter complies. Because this incentive yields strategic substitution between symmetric exporters, the coexistence of the complier and the non-complier appears in equilibrium. Our model consists of three final-good producers (one in an importing country and two in an exporting country) and one input supplier, which is in the importing country and has monopoly power. We show that within the range of parameter values for which some exporters comply with ROO, the content rate affects the output of the final-good producer in the importing country and the country's welfare in a U-shaped fashion. The content rate levels that allow the coexistence of the complier and the non-complier minimize welfare.

February 2013

 

Yushi Yoshida (Shiga University)
gIntra-Industry Trade, Fragmentation and Export Margins: An Empirical Examination of Sub-regional International Tradeh
North American Journal of Economics and Finance Vol.24 (2013) 125-138

This study contributes to the existing empirical investigation of international trade by providing new evidence of intra-industry trade using sub-regions within a nation. We calculate the Grubel-Lloyd intra-industry trade index for 41 Japanese regions with Korea during the period from 1988 to 2006. In sub-regional intra-industry trade regression models, we introduce extensive and intensive margins of prefecture exports as new explanatory variables. We find that a rise in sub-regional intra-industry trade is driven by the introduction of a new variety of exports, while intra-industry trade is discouraged by an increase in the trade value of products that are already exported.

 

AutAsuka Oura (Osaka University) and Tadashi Morita (Osaka Gakuin University)
gNeutrality of an increase in the price of natural resources to the level of technologyh
Economic Modelling
In this paper, to investigate how an increase in the price of natural resources affects the level of technology, we develop an endogenous variety expansion model of a small open economy based on that of Grossman and Helpman (1991, Ch. 3). We conclude that an increase in the price of natural resources has a neutral effect on the level of technology in the long run.

 

Takashi Kamihigashi (Kobe University) and John Stachurski (Australian National University)
gStochastic Stability in Monotone Economiesh
Theoretical Economics
This paper extends a family of well-known stability theorems for monotone economies to a significantly larger class of models. We provide a set of general conditions for existence, uniqueness and stability of stationary distributions when monotonicity holds. The conditions in our main result are both necessary and sufficient for global stability of monotone economies that satisfy a weak mixing condition introduced in the paper. Through our analysis we develop new insights into the nature and causes of stability and instability.

 

January 2013

 

Been-Lon Chen, Yu-Shan Hsu and Kazuo Mino
gCan Consumption Habit Spillovers be a Source of Equilibrium Indeterminacy?h

Journal of Economics

This paper investigates whether the external consumption habit can be a source of indeterminacy in a one-sector growth model when the labor supply is elastic. When there is a proper habit effect with a positive intertemporal elasticity of substitution, we find that the model exhibits indeterminacy if the coefficient of the habit formation is sufficiently large that allows for a substantial impact of current consumption on the habit. Indeterminacy arises even though the elasticity of the Frisch labor supply is positive and the elasticity of the labor demand in negative. In a calibrated version, we find that indeterminacy is empirically plausible when the habit effect is negative that features the gcatching up with the Jonesesh effect. Under given gcatching up with the Jonesesh effects, the external consumption habit can be a source of indeterminacy even if more than a half of the external consumption habit comes from past average consumption.

Taketo Kawagishi and Kazuo Mino
gTime Preference and Long-Run Growth: the Role of Patience Capitalh
Economics Bulletin
This paper studies the relation between long-term economic growth and time preference of households in the context of a simple model of endogenous growth. We assume that the rate of time preference depends on the level of households' patience (stock of patience capital). It is assumed that the patience capital is accumulated by households' future-oriented investment and decumulated by consumption activities. The paper focuses on how the level of patience capital is determined in the balanced-growth equilibrium.

Yunfang Hu and Kazuo Mino
gTrade Structure and Belief-Driven Fluctuations in a Global Economyh
Journal of International Economics

This paper constructs a dynamic two-country model with country-specific production externalities and inspects the presence of equilibrium indeterminacy under alternative trade structures. It is shown that the presence of belief-driven economic fluctuations caused by equilibrium indeterminacy is closely related to the specified trade structure. If investment goods are not internationally traded and international lending and borrowing are allowed, then indeterminacy arises in a wider set of parameter space than in the corresponding closed economy. By contrast, either if both consumption and investment goods are traded in the absence of international lending and borrowing or if only investment goods are traded with financial transactions, then the indeterminacy conditions are the same as those for the closed economy counterpart.