Takumi Naito Review of International Economics
Eiji Fujii Oxford Bulletin of Economics and Statistics
Kenji Fujiwara B.E. Journal of Theoretical Economics
Kazuhiro Takauchi and Tomomichi Mizuno International Review of Economics and
Tsuyoshi Toshimitsu Managerial and Decision Economics
Sabien Dobbelaere and Kozo Kiyota Labour Economics
Arghya Ghosh and Jota Ishikawa Review of International Economics
Angus C. Chu, Guido Cozzi, Yuichi Furukawa, and Chih-Hsing Liao Journal of Money, Credit, and Banking
Tamaki Morita, Keisaku Higashida, Yasuhiro Takarada, and Shunsuke Managi Resources Policy
Takumi Naito (Waseda University)
“A larger country sets a lower optimal tariff”
Review of International Economics
We develop a new optimal tariff theory which is consistent with the fact that a larger country sets a lower tariff. In our dynamic Dornbusch-Fischer-Samuelson Ricardian model, the long-run welfare effects of a rise in a country's tariff consist of the direct revenue, indirect revenue, and growth effects. Based on this welfare decomposition, we obtain two main results. First, the optimal tariff of a country is positive. Second, the optimal tariff of a country is likely to be decreasing in its absolute advantage parameter, implying that a larger (i.e., more technologically advanced) country sets a lower optimal tariff.
Eiji Fujii (Kwansei Gakuin University)
“What Does Trade Openness Measure?”
Oxford Bulletin of Economics and Statistics
An empirical measure of trade openness is defined as the ratio of total trade to GDP, and represents a convenient variable routinely used for cross-country studies on a variety of issues. However, the effects that the crude measure captures remain ambiguous, making it difficult to interpret the empirical results. Drawing on several strands of the literature, this study examines the informational content of the trade openness measure using intranational and international data. We find that, even for fully integrated economies within a country, trade openness is approximately half as variable as it is for segmented diverse countries around the world. The information it conveys is better characterized as the extent of the economic remoteness and idiosyncratic distribution of sectoral production. The cross-country variation of trade openness derives more from the variability in GDP than trade.
Kenji Fujiwara (Kwansei
“The Effects of Entry when Monopolistic Competition and Oligopoly Coexist”
B.E. Journal of Theoretical Economics
This paper proposes a model of a continuum of industries in which some industries are monopolistically competitive, the others are oligopolistic, and they interact in a labor market. We use this model to examine the effects of entry of oligopolistic firms. We show that this raises the equilibrium wage and induces exit of monopolistically competitive firms. Then, we find that the profits of each oligopolistic firm and the whole oligopolistic industry decrease. Finally, we establish that if the elasticity of substitution is the same in all industries, welfare improves as a result of an increase in the oligopolistic firms.
(Kansai University) and Tomomichi Mizuno (Kobe
“Solving a hold-up problem may harm all firms: Downstream R&D and transport-price contracts”
International Review of Economics and Finance
This study considers transport-price contracts in a two-country duopoly model with firm-specific carriers. It is well-known that when an upstream firm fails to commit to keeping its transaction (or transport) price after a downstream firm's R&D investment, it causes the hold-up problem and diminishes the incentive for R&D investment. While previous literature emphasizes that the commitment to keep the transaction price is needed to overcome the hold-up problem, we show that this commitment may harm all firms. We also discuss the robustness of our results in cases with R&D spillovers, product differentiation, and non-linear production costs.
Tsuyoshi Toshimitsu (Kwansei Gakuin University)
“The optimal choice of internal decision-making structures in a network industry: a multiproduct monopoly case”
Managerial and Decision Economics
Focusing on the role of network compatibility effects between products of a multiproduct monopoly and on the form of consumer expectation for network sizes, we consider the optimal choice of internal decision-making structures, i.e., centralization and decentralization, and its welfare effect in a network industry. We demonstrate that if the degree of network compatibility effects is sufficiently large, the decentralized decision-making is socially optimal. However, in the case of consumer ex post expectations, it is optimal for the firm’s owners to choose the centralized decision-making. We apply the model to the cases of price-setting games, complementary products, and negative network externalities to examine the optimal choice of internal decision-making structures.
Sabien Dobbelaere (Vrije Universiteit Amsterdam) and Kozo Kiyota (Keio University)
“Labor Market Imperfections, Markups and Productivity in Multinationals and Exporters”
This paper examines the links between a firm’s internationalization status and the type and degree of market imperfections in product and labor markets. We develop a framework for modelling heterogeneity across firms in terms of (i) product market power (price-cost markups), (ii) labor market imperfections (workers’ bargaining power during worker-firm negotiations or a firm’s degree of wage-setting power) and (iii) revenue productivity. We apply this framework to analyze whether the pricing behavior of firms in product and labor markets differs across firms that engage in different forms of internationalization using an unbalanced panel of 7,458 manufacturing firms over the period 1994-2012 in Japan. Engagement in international activities is found to matter for determining not only the type of imperfections in product and labor markets but also the degree of imperfections. Clear differences in behavior between firms that serve the foreign market either through exporting or through FDI are observed. Exporters are more likely to be characterized by imperfect competition in the product market whereas the opposite holds for multinationals. Exporters are more likely to share rents based on the bargaining power of workers whereas a firm’s wage-setting power seems to generate wage dispersion across firms with foreign subsidiaries.
Arghya Ghosh (University of New South Wales) and Jota Ishikawa (Hitotsubashi University and RIETI)
“Trade liberalization, absorptive capacity
and the protection of intellectual property rights”
Review of International Economics
We examine how trade liberalization affects South's incentive to protect intellectual property rights (IPR) in a North-South duopoly model where a low-cost North firm competes with a high-cost South firm in the South market. The North firm serves the South market through either exports or foreign direct investment (FDI). The extent of effective cost difference between North and South depends on South's imitation, which in turn depends on South's IPR protection and absorptive capacity and North firm's location choice, all of which are endogenously determined in our model. For a given level of IPR protection, South's absorptive capacity under exports may be greater than under FDI. Even though innovation is exogenous to the model (and hence unaffected by South's IPR policy), strengthening IPR protection in South can improve its welfare. The relationship between trade costs and the degree of IPR protection that maximizes South welfare is non-monotone. In particular, South has an incentive to protect IPR only when trade costs are moderate. When masking technology or licensing is incorporated into the model, however, some protection of IPR may be optimal for South even if the trade costs are not moderate.
Angus C. Chu (Fudan University), Guido Cozzi (University of St. Gallen), Yuichi Furukawa (Chukyo University), and Chih-Hsing Liao (Chinese Culture University)
“Inflation and Innovation in a Schumpeterian Economy with North-South Technology Transfer”
Journal of Money, Credit, and Banking
This study analyzes how inflation affects innovation and international technology transfer via cash-in-advance constraints on R&D. We consider a North-South quality-ladder model that features innovative Northern R&D and adaptive Southern R&D. We find that higher Southern inflation causes a permanent decrease in technology transfer, a permanent increase in the North-South wage gap, and a temporary decrease in the Northern innovation rate. Higher Northern inflation causes a temporary decrease in the Northern innovation rate, a permanent decrease in the North-South wage gap, and ambiguous effects on technology transfer. Finally, we calibrate the model to China-US data to perform a quantitative analysis.
Tamaki Morita (Yamanashi Prefectural University), Keisaku Higashida (Kwansei Gakuin University), Yasuhiro Takarada (Nanzan University), and Shunsuke Managi (Kyushu University)
“Does Acquisition of Mineral Resources by Firms in Resource-Importing Countries Reduce Resource Prices?”
This study theoretically and empirically examines how resource prices are affected when firms in resource-importing countries acquire mineral resources. The study’s theoretical examination considers a simple, two-period model that demonstrates how firms acquiring mineral resources may raise either present or future resource prices. This finding implies that resource consumption in either period may decline. Strategic behavior of resource-mining firms, demand for final goods, and extraction costs play key roles in this examination. Using a dynamic panel model with oil price data, the study’s empirical portion estimates how acquiring resources affects the price of oil. Results demonstrate that prices in the present period rise, and prices in future periods decline.