Kazunobu Hayakawa (Institute of Developing Economies), Hiroshi Mukunoki (Gakushuin University)
"Foreseeing Potential Trade Effects of Additive Manufacturing: Evidence from Trade in Sound Recordings"
International Economic Journal
https://doi.org/10.1080/10168737.2024.2421380

Additive manufacturing (AM), known as three-dimensional printing, has the potential to drastically change the mode of production and trade in goods. However, it is challenging to investigate the effects of AM on trade because existing AM production patterns are still immature. As an analogy for the impacts of AM, this study investigates the effects of internet distribution on trade in sound recordings, which has changed after the emergence of online shops or streaming services. Specifically, we estimate the gravity equation in the bilateral trade in sound recordings among 197 countries in 2003–2017 and demonstrate that internet penetration significantly decreases trade in sound recordings. Furthermore, the strong protection of intellectual property rights in importing countries weakens the trade-reducing effect, whereas that in exporting countries magnifies such an effect.

Kazunobu Hayakawa (Institute of Developing Economies), Nuttawut Laksanapanyakul (Thailand Development Research Institute), Hiroshi Mukunoki (Gakushuin University)
"The trade effect of regional trade agreements in the presence of duty drawbacks”
The World Economy
https://doi.org/10.1111/twec.13605

Before regional trade agreements (RTAs) come into force, some firms enjoy duty-free imports using other tariff regimes such as a duty drawback (DD) regime. For such firms, the use of RTA tariff regimes will not provide additional benefits in terms of duty exemption. In this study, we examine the trade effects of RTAs in the presence of a DD regime. We theoretically demonstrate that firms that switch from a DD to an RTA regime will either increase or decrease their imports. Subsequently, we empirically analyse the effect of this switching on imports using firm-level trade data from Thailand. The empirical results show that switching firms either increase or do not change their imports. Our data also suggest that this increase in imported inputs is used to produce goods for the domestic market, not the export market. We also reveal that relatively small-sized firms tend to switch to the RTA regime, while relatively large-sized firms continue importing under the DD regime even after the entry of RTAs into force. With these results, we discuss the implication for the magnitude of trade creation effects of RTAs under the presence of DD regimes.

Kazunobu Hayakawa (Institute of Developing Economies), Fukunari Kimura (Keio University), Hiroshi Mukunoki (Gakushuin University), Shujiro Urata (ERIA)
"Negotiating over the rules of origin in regional trade agreements in Asia”
The World Economy
https://doi.org/10.1111/twec.13557

In regional trade agreements (RTAs), member countries choose a common rule of origin (RoO) for each product. This study examines the factors that influence RoOs in four ASEAN-plus-one RTAs, which are agreements between ASEAN and four individual countries. One unique feature is that ASEAN as a whole negotiates with a plus-one country, which may dilute the interests of individual ASEAN countries at large. Our findings are summarised as follows. First, the more restrictive RoOs are set in the products where plus-one countries are less competitive against most ASEAN countries. Second, the more restrictive RoOs are likely to be imposed in products that plus-one countries protect with higher most favoured nation tariffs. These two results reflect the bargaining power among a plus-on country and ASEAN countries and indicate that plus-one's preference influences RoOs more strongly. Third, we find contrasting results between intermediate and final products. RoOs are likely to be less restrictive in intermediate products and more restrictive in final products when plus-one countries have higher export competitiveness or when the majority of ASEAN countries have higher MFN tariffs.

Keiko Ito (Chiba University), Masahiro Endoh (Keio University), Naoto Jinji (Kyoto University), Toshiyuki Matsuura (Keio University), Toshihiro Okubo (Keio University), and Akira Sasahara (Keio University)
"Margins, concentration, and the performance of firms in international trade: Evidence from Japanese customs data"
Journal of the Japanese and International Economies

This study is the first to comprehensively investigate international trade at the firm-level using Japan’s customs data for the 2014-2020 period. We first decompose international trade into the intensive and extensive margins and show that the intensive margin accounts for around 30% and 40% of the variation in partner country-specific exports and imports, respectively. We next find a substantial concentration of trading firms: in 2017, the top 10% of exporters accounted for 96.6% of all exports, while the top 10% of importers were responsible for 94.6% of all imports. Finally, we match the customs data with other firm-level datasets and estimate the performance premia of exporting firms. Our findings indicate that exporting manufacturing firms outperform non-exporting manufacturing firms in all aspects we consider: sales, value added, the number of employees, the capital-labor ratio, productivity, and wages. Interestingly, the exporter premia of manufacturing firms for value added, labor productivity, and total factor productivity decreased between 2014 and 2016 and then increased until 2019, whereas the exporter premium for the average wage steadily increased.

Kazuhiro Takauchi (Kansai University, Kobe University), Tomomichi Mizuno (Kobe University)
"Consumer-benefiting transport costs: The role of product innovation in a vertical structure"
The B.E. Journal of Theoretical Economics

We examine the effects of reduced transport costs on a firm's horizontal product innovation activity and consumer welfare. It is well established that trade liberalization, including reducing transport costs, could enable innovative practices and make consumers better off. Trade theory, in particular, commonly asserts that zero transport costs maximize consumer surplus. In contrast, we demonstrate that (i) reduced transport costs can enhance a firm's incentives for investment; however, (ii) positive transport costs (trade barrier) can maximize consumer surplus.

Svetlana Demidova (McMaster U), Konstantin Kucheryavyy (CUNY Baruch College), Takumi Naito (Waseda U), Andrés Rodríguez-Clare (UC Berkeley and NBER)
"The Small Open Economy in a Generalized Gravity Model"
Journal of International Economics

To provide sharp answers to basic questions in international trade, a standard approach is to focus on a small open economy (SOE). Whereas the classic tradition is to define a SOE as an economy that takes world prices as given, in the new trade literature it is defined instead as one that takes foreign-good prices and export demand schedules as given. We develop a gravity model that nests all its standard microfoundations and show how to take the limit so that an economy that becomes infinitesimally small behaves like a SOE. We then derive comparative statics and optimal policy for the SOE. Ignoring standard tax indeterminacies, optimal policy is characterized by export taxes and import tariffs equal to the (inverse) foreign demand and supply elasticities, respectively, and employment subsidies determined by the scale elasticity (under perfect competition) or markups (under monopolistic competition).

Naoto Jinji (Kyoto University), Xingyuan Zhang (Kyoto Women’s University, Okayama University), and Shoji Haruna (Okayama University, Chuo University)
"Do deep regional trade agreements facilitate international research collaboration?"
Economics of Innovation and New Technology

We examine whether regional trade agreements (RTAs) facilitate international research collaboration. First, using a two-country model of a continuum of oligopolistic industries with process research and development (R&D) investment and spillovers, we analyze whether trade liberalization through a trade agreement with shallow or deep economic integration increases the number of firms that collaborate. We then empirically investigate the effects of shallow and deep RTAs by employing data on patents with multiple inventors from different countries at the United States Patent and Trademark Office for 114 countries/regions over 1990-2015. We interpret coinventions by inventors from different countries as evidence of international research collaboration. We find that both shallow and deep RTAs are positively associated with research collaboration among member countries, and that the effect of deep RTAs on international research collaboration is stronger than that of shallow RTAs under certain conditions.

Naoto Jinji (Kyoto University), Yukiko Sawada (Ryukoku University), Xingyuan Zhang (Kyoto Women’s University, Okayama University), and Shoji Haruna (Okayama University, Chuo University)
"Gravity for cross-border licensing and the impact of deep trade agreements: Theory and evidence"
Canadian Journal of Economics

We examine whether deep regional trade agreements (RTAs) facilitate cross-border licensing. A micro-founded gravity equation for each supply mode is derived from a model in which heterogeneous firms choose to supply their goods to foreign markets through export, foreign direct investment, or licensing. We present several comparative statics results regarding the effects of changes in the fixed costs of serving the destination country, the freeness of trade, and the strength of intellectual property rights (IPR) protection on bilateral flows of licensing revenues. We then empirically test our theoretical predictions using data on the cross-border flows of royalties and license fees for 49 countries in the period 1995-2012. In addition to variables that capture the impact of shallow and deep RTAs, we construct dummy variables that represent subcategories of IPR-related provisions. Consistent with our theoretical predictions, we find that improved access to the destination market through a deep RTA and stronger IPR protection through an RTA with legally enforceable IPR and technology-related provisions increase bilateral flows of licensing revenues. Among IPR-related provisions, the accession to or ratification of existing international IP agreements and the protection of trademarks, patents, or industrial designs are important for facilitating cross-border licensing.

Yuki Higuchi, Keisaku Higashida, Mohammad Mosharraf Hossain, Mohammad Sujauddin, Ryo Takahashi, and Kenta Tanaka
"From hospitality to hostility: Impact of the Rohingya refugee influx on the sentiments of host communities"
Economic Development and Cultural Change
https://doi.org/10.1086/730704

This study aims to examine the impact of the 2017 Rohingya refugee influx on the sentiments of the host communities in Bangladesh, specifically focusing on their hostility toward the refugees. Using an incentivized joy-of-destruction game involving 1,679 individuals, it was found that 57% of hosts willingly bore personal costs to reduce the amount of donations provided to support the Rohingya, indicating revealed hostility toward the refugee population. The regression analysis indicates that hosts more directly exposed to the refugee camp exhibited a significantly greater reduction in their donations than those less exposed. This reduction was likely due to the damage caused by the influx on the host communities. However, both the exposed and less-exposed hosts stated similar negative opinions toward the refugees, suggesting that the experiment effectively elicited genuine hostility toward the refugee outgroup rather than cosmetic expressions of hostility.