2015

Taketo Kawagishi and Kazuo Mino Review of International Economics
Kazuo Mino Japanese Economic Review

Eiji Fujii Pacific Economic Review

Jota Ishikawa, Hodaka Morita, and Hiroshi Mukunoki Economic Theory

Kazuo Mino and Yasuhiro Nakamoto Economic Theory

Naoto Jinji and Yoshihiro Mizoguchi Journal of Industry, Competition and Trade

Naoto Jinji, Xingyuan Zhang, and Shoji Haruna Review of World Economics

Naoto Jinji and Xingyuan Zhang International Economic Journal

Akihiko Yanase Review of International Economics

Yan Ma International Review of Economics and Finance

Yasunobu Tomoda and Hiroshi Kurata Japanese Economic Review

Hiroshi Kurata International Economics

Laixun Zhao and Yongjin Wang Journal of International Economics

Laixun Zhao and Jean M.Viaene Journal of Japanese and International Economics

Laixun Zhao and Noriaki Matsushima Review of International Economics

Laixun Zhao and Tetsugen Haruyama The World Economy

Laixun Zhao, Hajime Takatsuka, and Dao-Zhi Zeng Resource and Energy Economics

Ryo Kambayashi and Kozo Kiyota Review of World Economics

Sabien Dobbelaere, Kozo Kiyota, and Jacques Mairesse Journal of Comparative Economics

Paul S. Segerstrom and Yoichi Sugita Journal of the European Economic Association

Kazuhiro Takauchi Economic Modelling

December 2015

Taketo Kawagishi and Kazuo Mino,
“Time Preference and Income Convergence in a Dynamic Heckscher-Ohlin Model”
Review of International Economics
This paper shows that income convergence in an open-economy setting hinges upon how the time discount rate of the households is determined. As opposed to the case of constant time discount rate where cross-country income divergence may emerge, the small open economy may catch up with the rest of the world if the time discount rate increases with consumption. In contrast, if the time discount rate decreases with consumption, then the small open economy fails to catch up with the rest of the world under free trade of commodities.

Kazuo Mino
“Fiscal Policy in a Growing Economy with Financial Frictions and Firm Heterogeneity”
Japanese Economic Review
This paper constructs a tractable model of endogenous growth with financial frictions and firm heterogeneity. We introduce factor income tax, consumption tax as well as the government consumption into the base model and explore the growth effect of fiscal policy. We show that from the qualitative perspective, the long-run effects of fiscal actions in our model are similar to those obtained in the representative-agent models. However, the quantitative impacts of fiscal policy on long-run growth in our model can be substantially different from those established in the model where agents are homogeneous and there is no financial friction.

October 2015

Eiji Fujii (Kwansei Gakuin University)
“Reconsidering the Price-Income Relationship across Countries”
Pacific Economic Review
This study reconsiders the well-known cross-country positive association between prices and income by focusing on heterogeneity between the inter-developed-country and inter-developing-country relationships. Empirical results suggest that developed and developing countries exhibit the positive price-income association for different reasons. Specifically, we find only for the inter-developed-country case that the positive price-income association is attributable, at least partly, to the Balassa-Samuelson productivity differential effect. The idiosyncrasy of the inter-developing-country relationship is not dissolved by controlling for the effects of a variety of real and financial variables. The findings cast some doubt on the conventional account for the cross-country price-income relationship.

Jota Ishikawa (Hitotsubashi University), Hodaka Morita (University of New South Wales), and Hiroshi Mukunoki (Gakushuin University)

“Trade Liberalization and Aftermarket Services for Imports”
Economic Theory
We analyze the provision of repair services (aftermarket services that are required for a certain fraction of durable units after sales) through an international duopoly model in which a domestic firm and a foreign firm compete in the domestic market. Trade liberalization in goods, if not accompanied by the liberalization of foreign direct investment (FDI) in services, induces the domestic firm to establish service facilities for repairing the foreign firm’s products. This weakens the firms’ competition in the product market, and the resulting anti-competitive effect hurts consumers and reduces world welfare. Despite the anti-competitive effect, trade liberalization may also hurt the foreign firm because the repairs reduce the sales of the imported good in the product market. Liberalization of service FDI helps resolve the problem because it induces the foreign firm to establish service facilities for its own products.

September 2015

Kazuo Mino and Yasuhiro Nakamoto
“Heterogeneous Conformism and Wealth Distribution in a Neoclassical Growth Model”
Economic Theory
This paper explores the role of consumption externalities in a neoclassical growth model in which households have heterogeneous preferences. We find that the degree of conformism in consumption held by each household significantly affects the speed of convergence of the aggregate economy as well as the patterns of wealth distribution in the steady state equilibrium. In particular, a higher degree of consumption conformism accelerates the convergence speed of the economy towards the steady state. We also reveal that in an economy with a high degree of conformism, the pattern of initial distribution of wealth tends not to be sustained in the long run.

Naoto Jinji (Kyoto University) and Yoshihiro Mizoguchi (Teikyo University)
“Optimal rules of origin with asymmetric compliance costs under international duopoly”
Journal of Industry, Competition and Trade
We examine the optimal rules of origin (ROO) in a free trade area/agreement (FTA) by employing a stylized three-country partial equilibrium model of an international duopoly. We incorporate compliance costs of the ROO into the model. In particular, compliance costs are higher for a firm located in a non-member country of the FTA than for a firm (an internal firm) located in an FTA member country, whereas marginal production costs are lower for the former. The FTA member countries set the optimal level of ROO to maximize their joint welfare. An importing country within the FTA imposes tariffs on imports that do not comply with the ROO. We show that the optimal ROO may have a protectionist bias in the sense that they are set for only the internal firm to comply. ROO may also cause low utilization of FTAs when they are set such that even the internal firm does not comply with them. These cases arise depending on parameter values.

Naoto Jinji (Kyoto University), Xingyuan Zhang (Okayama University), and Shoji Haruna (Okayama University)
“Trade patterns and international technology spillovers: evidence from patent citations”
Review of World Economics
In this paper, we empirically examine the relationship between bilateral trade patterns and international technology spillovers for a sample of 55 countries during 1995--2006. Technology spillovers are measured by using patent citation data taken from the United States Patent and Trademark Office. The main contribution of this paper is to provide new evidence that the size of technology spillovers significantly varies according to bilateral trade patterns. In particular, horizontal intra-industry trade is associated with larger technology spillovers than vertical intra-industry trade, and the size of technology spillovers is smallest when the trade pattern is inter-industry trade. Given the fact that trade between technologically advanced countries has a higher share of horizontal intra-industry trade than trade between other combinations of countries, our findings suggest that trade may enlarge, rather than narrow, the technology gap between technologically advanced and less-advanced countries.

Naoto Jinji (Kyoto University) and Xingyuan Zhang (Okayama University)
“International knowledge flows and productivity: intra- vs. inter-industry spillovers”
International Economic Journal
The effects of international knowledge spillovers on total factor productivity (TFP) at the industry level are examined by using a panel of 13 manufacturing industries across 15 OECD countries over 23 years.  We distinguish between intra- and inter-industry spillovers from the information on patent applications and citations.  Patent data are taken from the Japan Patent Office and the United States Patent and Trademark Office.  Using four alternative spatial panel estimation techniques, we find that international knowledge spillovers within the same industry significantly contribute to sectoral TFP.  In contrast, there is little evidence of a positive effect of international knowledge spillovers on TFP across industries.

June 2015

Akihiko Yanase (Nagoya University)
“Investment in Infrastructure and Effects of Tourism Boom”
Review of International Economics
This paper develops a dynamic trade model of a small open economy with productivity effects of public infrastructure and inbound tourism (i.e. foreign visitors' consumption of nontradable goods produced in the home country). It is shown that the economy either specializes in the production of the nontradable good or diversifies production. In the case of specialization, a tourism boom, i.e. an increase in the foreign tourists' demand for the nontradable good, makes the economy better off. In the case of diversified production, by contrast, a tourism boom induces a deterioration in the terms of trade and the economy may be worse off.

April 2015

Yan Ma (Kobe University)

“The Product Cycle Hypothesis: the Role of Quality Upgrading and Market Size”

International Review of Economics and Finance

We develop a dynamic model in which the timing of innovating firm to relocate the production of a new product from North to South is endogenously determined. The decision of whether to produce in the South involves a trade-off between marginal cost savings from lower wages against a fixed coordination cost. The innovating firm invests in R&D to improve the quality of a new product, which raises the size of the market and the cost savings from producing in the South. We demonstrate that a new product is initially produced in the North and its production location is shifted to the South when its quality is sufficiently improved. We also investigate the interaction between the location of production and the rate of quality improvement.

March 2015

Yasunobu Tomoda （Kobe City University of Foreign Studies) and Hiroshi Kurata (Tohoku Gakuin University)
“Artificially Low Interest Rates as Export Promotion Policy”
Japanese Economic Review

We reconsider the effects of a policy that sets an artificially low interest rate. Such a policy involves a combination of an interest rate ceiling and a rationing rule that assigns a priority-lending status to export sectors over domestic service sectors. We demonstrate that the policy works as an export-promotion policy, and improves national income. Furthermore, under some conditions, the policy expands the domestic service sector, despite the reduced amount of funds owing to the rationing rule. Finally, the artificially low interest rate improves national welfare.

Hiroshi Kurata (Tohoku Gakuin University)
“Service costs and economic welfare”
International Economics
This study examines the effects of service cost reduction on a “service-with-location” industry from a welfare perspective. We consider the situation where firms decide to locate in one of two regions with different region-specific marginal costs in industries with and without entry regulation. We demonstrate that in the entry-regulated industry, service cost reduction is favorable for producers and the overall economy, but it may be unfavorable for consumers. In contrast, in the entry-unregulated industry, service cost reduction is unambiguously favorable for all agents. This result implies that governments have an incentive to implement policies to reduce service costs, and they need formulate policies to protect consumers when service costs are reduced under entry-regulation.

Laixun Zhao (Kobe University) and Yongjin Wang (Nankai University)

“Saving good jobs from global competition by rewarding quality and efforts”

Journal of International Economics

This paper links firms' endogenous quality choices to worker effort and efficiency wages. In the model, firms differ in their ability to monitor workers who have an incentive to shirk. As high quality output requires high worker effort, it is firms with better monitoring ability that upgrade their quality. Indeed, these firms upgrade their quality to such a degree that they also end up paying higher wages to induce even more worker effort. Trade liberalization can induce greater or smaller wage inequality but always enlarges the welfare inequality as higher wages go hand in hand with even greater effort.

Laixun Zhao (Kobe University) and Jean M.Viaene (Erasmus University)

“Inspection, testing errors and trade in tainted products”
Journal of Japanese and International Economics

This paper examines international trade and inspection involving tainted products in a model of quality choice, facing fears that globalization is the cause of numerous food incidents. Particularly, we ask the following questions: (i) What are the conditions under which foreign firms choose to produce tainted goods? (ii) Does globalization via freer trade lower product safety? (iii) Why are goods imported even though they are known to be harmful? We show the existence of a free trade Nash equilibrium characterized by production and trade of high-quality non-tainted products. However, free trade cannot prevent the export of tainted goods, because the foreign firm may deviate under different combinations of parameters. We identify self-correcting mechanisms such as nationalism and a political-economy re-allocation of public resources in favor of customs authorities. Nevertheless, we also uncover activities that exacerbate tainted production like errors of testing and sabotage by rival firms.

Laixun Zhao (Kobe University) and Noriaki Matsushima (Osaka University)

“Multimarket linkages, trade and the productivity puzzle”

Review of International Economics

This paper examines the relationship between firms’ productivity improvement and the volume of exports, and shows that it can be sometimes negative, which seems to be an empirical puzzle. The key lies in that we simultaneously take into account intermediate retailers (i.e., vertically) and multimarket linkages (i.e., horizontally). With convex cost functions, when market conditions worsen, the manufacturer increases supply to the retailer who is bigger or more efficient in trade cost.

Laixun Zhao (Kobe University) and Tetsugen Haruyama (Kobe University)

“Plant location, wind direction and pollution policy under offshoring”
The World Economy

This paper examines how wind direction and environmentalism affect incentives to curb pollution in a unified three-country framework, with the country in the middle playing double roles as both a polluter and a victim. It is shown that governments’ preference over profits and consumer surplus is important, and so is environmentalism, which can deviate the ranking of pollution taxes from the world-welfare maximizing equilibrium if countries do not cooperate, even under a single multinational firm. In particular, the most downwind country has the least incentives to control pollution. Under oligopoly, several additional undesirable scenarios may arise, due to the interaction between wind direction and the incentive tradeoffs in rent-shifting and pollution control. We analyze in detail the mechanisms that cause these results, aiming to provide guidance for governments in designing more effective pollution-control policies.

Laixun Zhao (Kobe University), Hajime Takatsuka (Kagawa University), and Dao-Zhi Zeng (Tohoku University)

“Resource-based cities and the Dutch disease”

Resource and Energy Economics

This paper examines the relationship between resource development and industrialization. When transport costs for manufacturing goods are high, the region with a more valuable natural resource enjoys a higher welfare than the other region. However, when transport costs decrease, firms begin to move out of the region, causing the Dutch disease to occur, initially in terms of industry shares, but possibly in terms of welfare too when transport is sufficiently free. If resources are also used as manufacturing inputs as well as final goods, they can substitute for labor when wages rise, alleviating the Dutch disease by keeping production cost down. The model thus provides insight for cities to utilize their limited resources efficiently.

January 2015

Ryo Kambayashi <kambayas@ier.hit-u.ac.jp> and Kozo Kiyota <kiyota@sanken.keio.ac.jp>
“Disemployment Caused by Foreign Direct Investment? Multinationals and Japanese Employment”
Review of World Economics
Using parent–foreign affiliate matched data on Japan from 1995 to 2009, this paper examines the effects of foreign direct investment (FDI) on domestic employment, especially in manufacturing. One of the contributions of this paper is that we utilize the matched data for each country in which Japanese multinational firms operate, which enables us to identify the differences in the impact of FDI between destinations. Results indicate that the increases in the investment goods price in China but the decreases in it in the United States negatively affected the domestic labor demand of multinationals in Japan. This contrast may reflect a difference in specialization patterns across countries. We also found that disemployment in Japan was driven mainly by substitution between capital and labor, rather than by the reallocation of labor from Japan to overseas.

Sabien Dobbelaere <sabien.dobbelaere@vu.nl>, Kozo Kiyota <kiyota@sanken.keio.ac.jp>, and Jacques Mairesse <Jacques.Mairesse@ensae.fr>
“Product and Labor Market Imperfections and Scale Economies: Micro-evidence on France, Japan and the Netherlands”
Journal of Comparative Economics
Allowing for three labor market settings (perfect competition or right-to-manage bargaining, efficient bargaining and monopsony), this paper relies on two extensions of Hall’s econometric framework for estimating simultaneously price-cost margins and scale economies. Using an unbalanced panel of 17653 firms over the period 1986-2001 in France, 8728 firms over the period 1994-2006 in Japan and 7828 firms over the period 1993-2008 in the Netherlands, we first apply two procedures to classify 30 comparable manufacturing industries in 6 distinct regimes that differ in terms of the type of competition prevailing in product and labor markets. For each of the predominant regimes in each country, we then investigate industry differences in the estimated product and labor market imperfections and scale economies. Consistent with differences in institutions and in the industrial relations system in the three countries, we find important regime differences across the three countries and also observe differences in the levels of product market imperfections and scale economies within regimes.

Paul S. Segerstrom (Stockholm School of Economics) and Yoichi Sugita (Institute of Developing Economies)
“The Impact of Trade Liberalization on Industrial Productivity”
Journal of the European Economic Association
An empirical finding by Trefler (2004, AER) and others that industrial productivity increases more strongly in liberalized industries than in non-liberalized industries has been widely accepted as evidence for the Melitz (2003, Econometrica) model. We show that under fairly standard assumptions a multi-industry version of the Melitz model does not predict this relationship. Instead, it predicts the opposite relationship that industrial productivity increases more strongly in non-liberalized industries than in liberalized industries.

Kazuhiro Takauchi (Kansai University)
“Endogenous transport price and international R&D rivalry”
Economic Modelling
The purpose of this paper is to consider the relationship between monopoly transport prices and an industry's technology level of research and development (R&D). Although R&D efficiency is often considered a key factor to improve the performance of firms in an industry, we demonstrate that this standard view does not always hold in a trade model involving a monopoly transporter. In a one-way duopoly case, an exporter competes with a local firm in the local market but must pay a transport charge to the monopoly transporter to carry its product. We show that higher R&D efficiency may reduce the investments of an exporter. We further investigate a case of two-way trade comprising two symmetric countries. We also show that higher R&D efficiency may reduce the producers' profit.