2014

Takashi Kamihigashi and John Stachurski Journal of Mathematical Economics

Yunfang Hu and Kazuo Mino Pacific Economic Review

Kazuo Mino Economics Letters

Keisuke Hattori and Keisaku Higashida Economica

Tadashi Morita, Hajime Takatsuka, and Kazuhiro Yamamoto Japanese Economic Review

Tadashi Morita and Koki Sugawara Journal of International Trade and Economic Development

Yuichi Furukawa Economic Theory

Takashi Kamihigashi International Journal of Economic Theory

Kenji Fujiwara Journal of Public Economic Theory

Kenji Fujiwara Australian Economic Papers

Kenji Fujiwara International Review of Economics and Finance

Kenji Fujiwara and Ryoma Kitamura Journal of International Trade and Economic Development

Takashi Kamihigashi, Kevin Reffett, and Masayuki Yao International Journal of Economic Theory

Yin-Wong Cheung and Eiji Fujii Oxford Economic Papers

Akihiko Yanase Open Economies Review

Akihiko Yanase Strategic Behavior and the Environment

Akihiko Yanase Economics Bulletin

Yasushi Kawabata and Yasuhiro Takarada International Economics

Kenta Tanaka, Keisaku Higashida, and Shunsuke Managi Australian Journal of Agricultural and Resource Economics

Keisuke Hattori and Keisaku Higashida Information Economics and Policy

Naoto Jinji Economics Letters

Takeo Hori, Masako Ikefuji and Kazuo Mino International Economic Review

Noriaki Matsushima and Kazuhiro Takauchi Transportation Research Part B: Methodological

Angus C. Chu, Guido Cozzi, and Yuichi Furukawa Review of Economic Dynamics

Flora Bellone, Kozo Kiyota, Toshiyuki Matsuura, Patrick Musso, and Lionel Nesta European Economic Review

Doan Thi Thanh Ha, and Kozo Kiyota Japanese Economic Review

Yoshinori Kurokawa Journal of Economic Surveys

 

November 2014

 

Takashi Kamihigashi (Kobe University) and John Stachurski (Australian National University)
gPerfect Simulation for Models of Industry Dynamicsh
Journal of Mathematical Economics
In this paper we introduce a technique for perfect simulation from the stationary distribution of a standard model of industry dynamics. The method can be adapted to other, possibly non-monotone, regenerative processes found in industrial organization and other fields of economics. The algorithm we propose is a version of coupling from the past. It is straightforward to implement and exploits the regenerative property of the process in order to achieve rapid coupling.

 

Yunfang Hu and Kazuo Mino

gCapital Accumulation and Structural Change in a Small-Open Economyh
Pacific Economic Review
This paper explores the relation between capital accumulation and transformation of industrial structure in a small open-economy. Using a three-sector, neoclassical growth model with non-homothetic preferences, we examine dynamic behavior of the small country in the alternative trade regimes. We show that capital accumulation plays a leading role in the process of structural transformation. It is also revealed that the trade pattern significantly affects structural change. We demonstrate that our model can mimic a typical pattern of change in industrial structure that has been observed in many developed economies.

Kazuo Mino

gA Simple Model of Endogenous Growth with Financial Frictions and Firm Heterogeneityh
Economics Letters
This paper constructs a simple model of endogenous growth with financial frictions and firm heterogeneity. In the presence of financial constraints and heterogeneity in production efficiency of firms, the firms whose efficiency exceeds the cutoff level produce and the entrepreneurs who own those firms become borrowers. We show that even if production technology of each firm has an Ak property, the aggregate economy has transition dynamics and that the balanced growth rate depends on the aggregate distribution of wealth between rentiers and entrepreneurs.

 

Keisuke Hattori (Osaka University of Economics) and Keisaku Higashida (Kwansei Gakuin University)

gWho benefits from misleading advertising?h

Economica

Considering a model of price and misleading advertising competition between two brands producing horizontally and vertically differentiated brands, we investigate allocative implications of misinformation and related regulatory policies. Although misinformation distorts consumers' decision-making, certain types of misinformation can correct inefficiencies resulting from misallocation of goods, thereby increasing welfare. However, advertising competition may lead to a prisoner's dilemma for firms and reduce welfare, but smart consumers who are never misled by misinformation and consumers who prefer a low-quality brand may gain. We also demonstrate how a biased policymaker who places different weights on industry profits and consumer benefits behaves in response to misinformation disseminated by firms.

 

Tadashi Morita (Kindai University) Hajime Takatsuka (Kagawa University) Kazuhiro Yamamoto (Osaka University)

gDoes Globalization Foster Economic Growth?h

Japanese Economic Review

This article examines the effects of globalization, by especially focusing on the relaxation of local equity requirements (LERs) in developing countries. By constructing an endogenous growth model, where profit leakage to the South through LERs plays a key role, we obtain the following results. First, the relaxation of LERs in the South drives the relocation of firms from the North to the South, yielding a U-shaped growth rate. Second, our numerical simulations suggest that a sufficient relaxation of LERs is beneficial for the South, although the shared profit of joint ventures is maximized through the use of LERs.

 

Tadashi Morita (Kindai University) Koki Sugawara (Nagoya Gakuin University)

gHuman Capital and FDI: Development Process of the Developing Country in an Overlapping Generations Modelh

Journal of International Trade and Economic Development

We construct an overlapping generations model with human capital accumulation to analyze the effect of human capital level on foreign direct investment (FDI) in a small open developing country. In particular, we assume that manufactured goods have the human capital intensive technology and young agents choose whether to work or to educate themselves. When the human capital level in the developing country is sufficiently small, manufactured goods firms do not conduct FDI and the economy in the developing country is trapped in poverty. If the government of the developing country levies a tariff on the imports of manufactured goods, manufacturers conduct FDI and the economy in the developing country can escape from the poverty trap.

 

Yuichi Furukawa (Chukyo University)

gLeapfrogging Cycles in International Competitionh

Economic Theory

Technological leadership has shifted at various times from one country to another. We propose a mechanism that explains this perpetual cycle of technological leapfrogging in a two-country model including the dynamic optimization of an infinitely lived consumer. In the model, each country accumulates knowledge stock over time because of domestic innovation and spillovers from foreign innovation. We show that if the international knowledge spillovers are reasonably efficient, technological leadership may shift first from one country to another, and then alternate between countries along an equilibrium path.

 

August 2014

 

Takashi Kamihigashi (Kobe University)

gMultiple Interior Steady States in the Ramsey Model with Elastic Labor Supplyh
International Journal of Economic Theory

In this paper, we show that multiple interior steady states are possible in the Ramsey model with elastic labor supply. In particular, we establish the following three results: (i) for any discount factor and production function, there is a utility function such that a continuum of interior steady states exist; (ii) the number of interior steady states can also be any finite number; and (iii) for any discount factor and production function, there is a utility function such that there is no interior steady state. Some numerical examples are provided.

 

July 2014

 

Kenji Fujiwara (Kwansei Gakuin University)

gTax Principles and Tariff-Tax Reforms under International Oligopolyh

Journal of Public Economic Theory

In a two-country duopoly model, this paper compares destination- and origin-based commodity taxes adjusted to tariff reductions so that the world price and foreign welfare remain unaltered. We first find that this tariff-tax reform reduces domestic welfare under the destination principle while the opposite holds under the origin principle. Then, it is shown that this ranking is reversed if exports are taxed. In short, which is preferable between destination and origin taxes depends on the tax principle and which between imports and exports are taxed.

 

Kenji Fujiwara (Kwansei Gakuin University)

gTax Principles and Coordination of Domestic and Trade Policies under Imperfect Competitionh

Australian Economic Papers

We construct an exporting monopoly model to compare destination- and origin-based commodity taxes in a context of a trade and domestic tax reform. We show that an export tax reduction and a change in destination (resp. origin) tax that fix the world price is strictly Pareto-improving (resp. deteriorating), which holds whether markets are integrated or segmented. This result may provide a new rationale for preferring the destination-based consumption tax to the origin-based production tax that has been discussed in the literature of tax harmonization and tax competition.

 

Kenji Fujiwara (Kwansei Gakuin University)

gPareto-Improving Tariff-Tax Reforms under Imperfect Competitionh

International Review of Economics and Finance

Constructing a duopoly model with non-constant marginal costs and a strict Pareto criterion, this paper examines welfare effects of world-price-fixing tariff reductions accompanied by adjustments of a domestic tax. If a destination-based consumption tax is used, this reform achieves a strict Pareto improvement under sufficiently decreasing marginal costs. If, in contrast, an origin-based production tax is employed, a strict Pareto improvement holds whether marginal cost is decreasing or not. Thus, we can conclude that tariff-tax reforms that improve the world welfare and are irrelevant of tax bases are possible if the targeted industry exhibits sufficiently decreasing marginal costs.

 

Kenji Fujiwara (Kwansei Gakuin University) and Ryoma Kitamura (Kwansei Gakuin University)

gA Trade and Domestic Tax Reform in Imperfectly Competitive Marketh

Journal of International Trade and Economic Development

This paper develops a model of an export oligopoly to examine the welfare effects of an export tax reduction and a production tax increase that makes the foreign country no-worse off. Whether or not entry into the oligopolistic industry is free, the proposed policy reform is shown to reduce welfare of the policy-implementing country and the world. Relating this result to the perfectly competitive case, we closely discuss its implications.

 

Takashi Kamihigashi (Kobe University), Kevin Reffett (Arizona State University), and Masayuki Yao (Keio University)
gAn Application of Kleene's Fixed Point Theorem to Dynamic Programming: A Noteh
International Journal of Economic Theory

In this note, we show that the least fixed point of the Bellman operator in a certain set can be computed by value iteration whether or not the fixed point is the value function. As an application, we show one of the main results of Kamihigashi (2014, ``Elementary results on solutions to the Bellman equation of dynamic programming: existence, uniqueness, and convergence," Economic Theory 56, 251--273) with a simpler proof.

 

June 2014

 

Yin-Wong Cheung (City University of Hong Kong) and Eiji Fujii (Kwansei Gakuin University)
gThe Penn Effect within a Country – Evidence from Japanh
Oxford Economic Papers
To control for product quality and exchange rate effects, we use the Japanese regional data to study the Penn effect – the positive relationship between price and income levels. Comparable with the evidence from international data, the Penn effect is significant in the Japanese prefectural data and driven mainly by the prices of nontradables. We draw upon studies of productivity and economic density to explain the positive price-income relationship, and find that the empirical economic density variables explain the variability of the Japanese prefectural (relative) prices quite well.

 

Akihiko Yanase (Nagoya University)

gIndeterminacy and Pollution Haven Hypothesis in a Dynamic General Equilibrium Modelh

Open Economies Review

This paper develops a two-sector dynamic general equilibrium model of a small open economy in which production activities are accompanied by pollution emissions that have a negative effect on welfare. It is shown that the dynamic equilibrium may display indeterminacy (i.e., continuum of dynamic equilibrium paths converging to a common steady state), depending on (i) the relationship between capital intensity and pollution intensity, (ii) the property of householdsf discount rate as a function of total pollution, and (iii) the pollution-consumption relationship in instantaneous utility. In addition, the effect of environmental policy on the economyfs comparative advantage and its relation to indeterminacy are examined.

 

Akihiko Yanase (Nagoya University)

gCorporate Environmentalism in Dynamic Oligopolyh

Strategic Behavior and the Environment

This study investigates how an increase in the firms' environmental consciousness affects the environment and economic welfare in the presence of dynamic oligopolistic competition where firmsf objective may include the society's damage from stock pollution as well as their profits. If all firms are symmetric, an increase in the environmental consciousness reduces consumer surplus and social welfare in the short-run. However, profits may increase if the firms are initially less environmentally conscious. The long-run effects are similar to the short-run ones except for the effect on social welfare because pollution stock is reduced in the steady state. In the case of asymmetric firms, an increase in the polluting firms' environmental consciousness reduces their output whereas it increases the clean firms' output. The clean firms become better off, but depending on the relative number of polluting firms versus clean firms, the polluting firms' profits may increase or decrease.

 

Akihiko Yanase (Nagoya University)

gFree Trade may Save a Renewable Resource from Exhaustionh

Economics Bulletin

This study considers a small open economy in which two tradable final goods are produced by using a non-tradable resource good, which has an open-access property, as an input as well as a primary factor. If the intrinsic growth rate of the resource is relatively low, there may be no non-trivial steady state or multiple steady states. This implies that, by opening international trade, the economy can escape from the risk of complete depletion of the resource.

 

May 2014

 

Yasushi Kawabata (Nagoya City University) and Yasuhiro Takarada (Nanzan University)

gWelfare Implications of Free Trade Agreements under Bertrand and Cournot Competition with Product Differentiationh

International Economics

This study examines the effects of free trade agreements (FTAs) on the welfare of both member and nonmember countries and the incentives for multilateral free trade in a three-country model of Bertrand and Cournot competition in differentiated oligopolies. First, we demonstrate that an FTA increases the welfare of all member and nonmember countries in both Bertrand and Cournot competition with product differentiation. Second, we show that if products are nearly perfect substitutes, an FTA may hamper the incentive of a nonmember country to support multilateral trade liberalization with Bertrand competition, which sharply contrasts with the case of Cournot competition.

 

Kenta Tanaka, Keisaku Higashida, and Shunsuke Managi
gA Laboratory Assessment of the Choice of Vessel Size under Individual Transferable Quota Regimesh
Australian Journal of Agricultural and Resource Economics
This paper examines the effect of individual transferable quota regimes on technology choice, such as choice of vessel size, by using the laboratory experiment method. We find that even if vessel sizes change over time, the quota price can converge to the fundamental value conditioned on the vessels chosen. We also find that subjects choose their vessel type to maximize their profits based on the quota trading prices in the previous period. This result implies that the efficiency of quota markets in the beginning period is important because any inefficiency in quota markets may affect vessel sizes in ensuing periods. Moreover, we find that the initial allocations may significantly influence vessel sizes through two channels: first, a higher initial allocation to a subject increases the likelihood that the subject invests in a large-sized vessel; second, the quota price may be higher and more unstable under unequal allocation than under equal allocation; thus, whether the allocation is equal influences subjectsf choice of vessel type.

Keisuke Hattori and Keisaku Higashida
gMisleading Advertising and Minimum Quality Standardsh

Information Economics and Policy
This paper examines the relationship between misinformation about product quality and quality standards, such as minimum quality standards (MQSs) and certification criteria, when products are vertically differentiated in terms of their health/safety aspects. We investigate the welfare effect of regulating misinformation and strengthening MQSs. We find that the welfare effect of a decrease in misinformation crucially depends on the existing amount of misinformation; moreover, a more stringent MQS either improves or deteriorates welfare. Two effects figure strongly throughout our results. First, changes in misinformation and/or an MQS make price competition between firms more or less serious, causing changes in price and quantity. Second, these changes influence some consumers' choices, leading them to change the products that they purchase. This change in consumption behavior increases or decreases inappropriate choices when misinformation is present. We extend the analysis to the case in which a high-quality firm's quality investment is endogenously determined.

 

Naoto Jinji (Kyoto University)
gComparative Statics for Oligopoly: A Generalized Resulth
Economics Letters
We perform comparative statics for a general model of asymmetric oligopoly and derive a concise formula for the response of one firm to a marginal change in its rival's strategic variable, taking into account the responses of all other firms. We obtain the conditions under which the sign of this response coincides with that of the mixed second-order partial derivative of the firm's payoff function. We then propose a distinction between gross and net strategic relationships (i.e., strategic substitute and complement).

 

Takeo Hori, Masako Ikefuji and Kazuo Mino
gConformism and Structural Changeh
International Economic Review
Using a simple, multi-sector model of endogenous growth, we show that commodity-specific consumption externalities can be a source of structural change. When the degrees of consumption externalities are different between goods, each sector grows at a different rate. However, the aggregate economy exhibits balanced growth in that capital stock and expenditure grow at the same constant rate. A three-sector version of our model may reconcile Kaldorfs stylized facts with empirically plausible profiles of industrial structure transformation.

 

April 2014

 

Noriaki Matsushima (ISER Osaka University) and Kazuhiro Takauchi (Kansai University)

gPort Privatization in an International Oligopolyh
Transportation Research Part B: Methodological

We investigate the effects of port privatization on port usage fees, firm profits, and welfare. Our model consists of an international duopoly with two ports and two markets. When the unit transport cost is high, port privatization reduces port usage fees, although neither government has an incentive to privatize its port. The equilibrium governmental decisions are inconsistent with the desirable outcome if the unit transport cost is not high enough. The government of the smaller country, in terms of market size, is more likely to privatize its port, and the government of the larger country is more likely to nationalize its port to protect its domestic market.

 

Angus C. Chu (University of Liverpool), Guido Cozzi (University of St. Gallen), and Yuichi Furukawa (Chukyo University)

gEffects of Economic Development in China on Skill-Biased Technical Change in the USh

Review of Economic Dynamics
In this study, we explore the effects of a change in unskilled labor in China on the direction of innovation in the US by incorporating production offshoring into a North-South model of directed technical change. We find that intellectual property rights (IPRs) and offshoring are different ways for the labor endowment of the South to affect the size of the market for innovations in the North. Absent offshoring and lacking IPRs in the South - as in China in the early 1980s - an increase in Southern unskilled labor should lead to skill-biased technical change. If instead offshoring is present and/or IPRs are better enforced (as in China in more recent times), then a decrease in unskilled labor in the South should lead to skill-biased technical change. Furthermore, an increase in Southern per capita stock of capital reduces offshoring and also leads to skill-biased technical change. Calibrating the model to China-US data, we find that under a moderate elasticity of substitution between skill-intensive and labor-intensive goods, the decrease in unskilled labor and the increase in capital in China can explain about one-third of the recent increase in the skill premium in China through skill-biased technical change in the US. 

 

March 2014

 

Flora Bellone, Kozo Kiyota, Toshiyuki Matsuura, Patrick Musso, and Lionel Nesta
gInternational Productivity Gaps and the Export Status of Firms: Evidence from France and Japanh
European Economic Review
This paper provides new evidence on international productivity gaps; This evidence is obtained from large-scale firm-level data from the French and Japanese manufacturing industries using non-parametric methodologies designed to overcome confidentiality restrictions. Our primary finding is that international productivity gaps are sensitive to the export status of firms. We also show that productivity differences between French and Japanese exporters vary across export destinations. We propose a simple analytical framework to relate those basic findings to the new models of international trade with heterogeneous firms. Under this framework, international firm-level productivity comparisons provide new insights into the importance of trade-related institutional and policy differences across countries.

Doan Thi Thanh Ha, and Kozo Kiyota
gFirm-level Evidence on Productivity Differentials and Turnover in Vietnamese Manufacturingh
Japanese Economic Review
This paper examines the relationship between productivity differentials and firm turnover in Vietnamese manufacturing. We utilize firm-level data between 2000 and 2009, including the year 2007, when Vietnam joined the World Trade Organization (WTO). Our major findings are twofold. First, the productivity of entrants, survivors, and exiters increased simultaneously from 2006 to 2007. This result suggests that the cutoff productivity level increased after trade liberalization. Second, the resource reallocation between firms was facilitated after the liberalization. These findings are consistent with the implications of the recent models of international trade and firm heterogeneity.

 

February 2014

 

Yoshinori Kurokawa (University of Tsukuba)
gA Survey of Trade and Wage Inequality: Anomalies, Resolutions, and New Trendsh
Journal of Economic Surveys
This paper surveys recent studies on trade and wage inequality. We first introduce some trade-based explanations for increased wage inequality. There are, however, a number of criticisms of this line of thought based on the "trade-wage inequality anomaly," the "price-wage anomaly," and the small volume of trade. Mainly due to these criticisms, trade-based explanations for rising wage inequality have been limited in the economic literature. Rather, the primary explanations for wage inequality have been based on skill-biased technological change. Some trade models, however, have weakened the
above criticisms, and more economists now argue that the effect of trade, though relatively small compared to that of technological change, is more significant than generally believed. Finally, we attempt to link new trends in inequality, such as job polarization and within-group inequality, to the trade and wage inequality literature.